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South Korea’s Prosecutors Accuse Upbit Exchange of $226M Fraud by a Corporate Account


cryptovest.com 21 December 2018 15:07, UTC
Reading time: ~2 m

South Korea’s prosecutors have accused Upbit, one of the largest crypto markets in the country and worldwide, of defrauding clients with 254 trillion won ($226 million) through a corporate trading account last year, Yonhap news agency reported on Friday. Upbit denied any illegal activities and defended the creation of the company account as part of its effort to make the exchange liquid in the first months after the platform’s launch.

Seoul Southern District Prosecutor's Office’s indicted personally three members of Upbit’s staff – the chairman’s board, the firm’s financial director, and a working-level official. The three persons opened and managed the account by which the company conducted bogus transactions and sold 11,500 Bitcoins to 26,000 clients. The practice was put in place from October 24, the exchange launching date, until December 14 last year.

Upbit denies any involvement in wash trading and imaginary orders saying that it created the corporate account to let around $200,000-300,000 of its own fiat money and cryptos in the platform and thus protecting customers from “drastic” price changes. Neither the exchange nor any staff member received financial benefits from the corporate account trades, the South Korean firm said.

However, Upbit admitted that a type of cross trading happened for around two months after October 24, but it was not a wash trading, and no clients were defrauded. The practice accounted for approximately 3% of daily volumes. The prosecutors only analyzed the BTC buy orders in their investigation and excluded sell orders, Upbit explained.

“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,” Upbit explained.

“The account used during the process was a strictly maintained corporate account, and cross trading was conducted in a way that did not affect the market price. Its use was strictly limited to marketing campaign in the early days of the exchange. Trading commission incurred during the activity did not account as the company's revenue.”

A Seoul judge should schedule a court hearing in the following months.

Upbit, which along with its domestic platform, operates Singapore-based international exchange, clocked $1 billion trading volume for the 24 hours to 13:57 UTC on Friday, Coinmarketcap data shows.

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