Coinbit: South Korea exchange execs charged over wash trading

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Authorities in South Korea have brought on market manipulation charges against the executives of one of the country’s largest digital currency exchanges, Coinbit. According to a local report, the charges were a follow-up to a raid conducted on the exchange in August.

Prosecutors in the capital of Seoul are preparing a case against some of the top executives at Coinbit, Newspim reports. The news outlet claims that the execs face charges of forgery of records and fraud.

The prosecutions come four months since the Seoul Metropolitan Police Agency raided the exchange’s offices. As CoinGeek reported in August, an analysis of the exchange’s transactions reportedly showed that it manipulated up to 99% of its total transactions volume. Local reports stated Coinbit owner Choi Mo and other executives opened several accounts which they used for wash trading, a form of market manipulation in which one sells and buys the same asset to create the illusion of high trading volume.

Seoul police claimed that the exchange had split the user’s funds into two major accounts. The first involved digital currencies including BTC, ETH and USDT. Coinbit allegedly used the second major account to trade dubious digital currencies and for initial exchange offerings. The owners would accumulate the dubious tokens in large amounts, creating high demand and driving the price through the roof, and then they would then dump the tokens to the users, making millions of dollars from their pump-and-dump schemes, according to reports.

To ensure that their market manipulation tactics went unnoticed, the operators allegedly imposed restrictions that prevented users from transferring their funds to other exchanges.

According to local reports, the exchange generated at least KRW100 billion (US$84 million) from the wash trading and pump-and-dump schemes.

Following wide media coverage of the illegal activities, the exchange released a statement claiming that the allegations were false. It blamed the wash trading on a few employees who were purportedly acting without the knowledge of the executives.

“Coinbit has not committed any illegal acts so far and has not been suspended by this time. No one, including Coinbit’s chairman, has been indicted or seized by the police on fraud charges,” the statement claimed.

This has now changed, with Seoul prosecutors now pressing charges against the alleged market manipulators.

Coinbit has been the third-largest in South Korea as per CoinMarketCap data, behind Upbit and Bithumb. However, with allegations of massive wash trading, it’s possible much of the trading volume was fake.

See also: CoinGeek Live panel, Digital Currency & Global Compliance: Tools & Tips for Exchanges, Wallets & Other Service Providers