Cryptocurrency exchange Upbit, the largest in South Korea, has been accused of falsifying orders and manipulating data processing systems, in the latest high profile example of regulators identifying suspected foul play.
Upbit is accused of manipulating data processing systems, resulting in gains of more than KRW120 billion ($106.8 million), while simultaneously running fake orders of as much as KRW254 trillion to inflate daily trading volumes, The Korea Times reported.
It comes as the latest example of a cryptocurrency exchange accused of manipulating figures, underlining the need for greater regulation of exchanges and how they operate.
Prosecutors from the Seoul Southern District Prosecutor’s Office have indicted at least three senior employees at the firm without detention, including a chairman of the company’s parent company, Dunamu.
If convicted of the charges, Upbit could be subject to secondary legal action from investors drawn to the exchange on false pretences, with actual trading volumes alleged to be significantly lower than reported, according to the report.
The case was passed to prosecutors by the Financial Services Commission (FSC), which suspected Upbit had been using bots to manipulate the figures. According to the FSC, the bots were allegedly designed to run fake transactions, in a bid to attract more real investors to the exchange.
An FSC official said there was concern about ‘exchanges like Upbit,’ and their effect on crypto markets and investor trust, explaining, “I’m worried about investors who may lose money in this market because of exchanges like Upbit. We need a way to make the market and the industry fair and transparent.”
Responding to the allegations in a press release, Upbit vehemently denied any wrongdoing.
“In the early days of the exchange, due to the lack of liquidity, the spread between the buy and sell orders was high and the need for matching the global price to trade was apparent. To achieve this, we employ a technical approach—cross trading,” according to the statement posted on the Upbit website. “Upbit has not sold or bought cryptocurrency that it did not own, and the employees did not benefit during the process. This will be explained in-depth during trial.”
Upbit was reported by the Blockchain Transparency Institute as the world’s third biggest crypto exchange by transaction volume as recently as December 13, following Binance and Bitfinex.
If convicted of manipulating transaction volumes, the table will be revised to reflect a more realistic projection of trading volumes.
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