South Korea’s top financial regulator has formally filed fraud charges against executives of one of the Asian country’s biggest cryptocurrency exchanges.
Three senior executives of Upbit including the founder Song Chi-Hyung were charged with making fraudulent transactions between September and December last year by prosecutors in Seoul, according to nocutnews.
Specifically, the senior Upbit executives are alleged to have inflated trading volume figures by using a fabricated corporate account to make falsified orders. This was with the intention of attracting more clients to the South Korean cryptocurrency exchanges.
According to the Financial Services Commission of South Korea, Upbit’s senior executives used a bot to manipulate the data processing system which consequently inflated the trading volumes. Additionally, it has also been alleged that underperforming coins on the cryptocurrency exchange were targeted and this was with the goal of assisting the platform and the issuer to save face by making it appear more popular and enjoying high demand than was really the case.
In a statement issued shortly after the charges were filed, Upbit responded by denying the accusations which were leveled against the executives noting that it ‘did not commit wash trading (cross trading), imaginary orders (provision of liquidity), or fraudulent trading’.
Upbit also argued that the cross trading/wash trading that is alleged to have taken place was purely for the benefit of customers and was minimal:
“For about two months after launching the service, some cross trading took place for marketing purposes. However, such trading had no influence on the market price, and the volume of such trading took up about 3% of the total trade volume at that time.”
According to Upbit, cross-trading also took place in the initial days of the cryptocurrency exchange launching operations and this was for the purposes of injecting liquidity:
In the early days of the exchange, due to the lack of liquidity, the spread between buy and sell orders was high and the need for matching the global price to facilitate trading was apparent. To achieve this, we employed a technical approach – cross trading.
This comes more than six months since the cryptocurrency exchange was raided by both the Financial Services Commission and the Korean Financial Intelligence Unit over suspicions of inflated volumes and balance sheet manipulation. Following the raid, the cryptocurrency exchange hired South Korean accounting firm Yoojin which concluded that there was no balance sheet manipulation.
South Korean prosecutors, however, seem to believe otherwise.
Last modified: May 20, 2020 1:20 PM UTC