Seoul police raided the offices of Coinbit — one of South Korea’s largest cryptocurrency exchanges. According to the authorities, the exchange manipulated trading volumes and illegally received $85 million.
Overstating trading volumes is often practiced by cryptocurrency exchanges, but Coinbit set a record — up to 99% of transactions were falsified. The exchange’s owner, Choi Mo, and other employees traded among themselves, which affected 252,000 active users in just one month.
The procedure itself is interesting: the management of Coinbit created two accounts where all users ‘ funds were placed. One account was used for trading large cryptocurrencies, while the other was used for trading little-known altcoins and tokens. By manipulating and inflating trading volumes, employees inflated the exchange rate of such coins, and then sold them to retail customers. As a result, the exchange’s management received $85 million in illegal profits.
Also, the South Korean authorities doubt the exchange’s accounting reports and suspect the management of Coinbit of tax evasion. Moreover, Coinbit has never passed an external audit.
“This is not the first time in South Korea, cryptocurrency exchanges have been accused of fraud. Unfortunately, along with the stricter regulation of this area in the country, we will see an increase in the number of such cases,” said Doo Wan Nam, head of business development in Asia at the MakerDAO project.
At the moment, the police confiscated papers and computers in several offices of the exchange in Seoul. The investigation is ongoing.
In July, the Coinsquare exchange from Canada recognized
charges of the Ontario securities Commission (OSC) for organizing fictitious trading. As a result, the exchange’s management will leave its post and pay a fine of $1 million.