Leaders of Komid, a cryptocurrency exchange in South Korea, have been sentenced to serve jail time for faking exchange volumes.
According to local report, two leaders including the CEO of Komid and another official, planned a scheme where they faked 5 million transactions in January last year to deceive investors. Reportedly, their actions were aimed at increasing the trade volume to $45 million.
Komid’s CEO, Choi HYUN-SUK, was sentenced to three years in prison while the other officer received a two-year sentence. The two were charged with fraud, misconduct, and embezzlement. The two are also purported to have used a bot to create large orders and attract new clients automatically. Reportedly, the other official, Park Mo, admitted to the allegation. He stated:
“We used the point balance, which Choi entered as false, in the actual password currency transaction. We repeated the order artificially and fooled investors as if transactions were happening smoothly.”
In the hearing the judge stated, “Choi has committed fraud for a countless number of victims for a long period of time…. Furthermore, he holds the financial authorities responsible for failing to keep track of the industry better.”
He added that the two had damaged customers’ confidence in the exchange which will eventually trickle down to the domestic virtual trading market. The judge, however, took into account that the two officials had returned some of the swindled money and thus their intentions were not wholly evil.
Such cases are becoming common in the country. Last year, authorities in South Korea accused Upbit, the largest cryptocurrency exchange in the country of manipulating its order books. Authorities went as far as to indict two senior officials from Upbit’s developer Dunamu and one Upbit employee.
Allegedly, a few officials from Upbit had faked orders worth about $226 million and sold 11,500 BTC to around 26,000 investors. Other exchanges, Coinnest, and HTS Coin were also resently involved in similar practices.
Earlier last year, a study showed that a large number of cryptocurrency exchanges are operating under fake trading volume. The study gave OKCoin as an example, which is currently known as Okex. Reportedly, no less than 93% of trade volume on the exchange was false.
New to blockchain? Check out CoinGeek’s Blockchain for Beginners section, the ultimate resource guide to learn more about blockchain technology.