Officials at Top Korean Cryptocurrency Exchange Upbit Indicted for Fraud


Officials at South Korea’s largest cryptocurrency exchange, Upbit, have been indicted for fraud. They allegedly made bogus crypto orders worth approximately $226 billion and sold 11,550 BTC to around 26,000 investors. Upbit has denied the charges and insisted that it did not commit fraud, engage in wash trades, or trade cryptocurrencies it did not own.

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Officials Indicted

Officials at Top Korean Cryptocurrency Exchange Upbit Indicted for FraudThree officials at South Korea’s largest cryptocurrency exchange, Upbit, have been “indicted for offering fraudulent transactions and swindling money from investors,” Yonhap reported Friday.

According to the Southern Seoul District Prosecutors’ Office, a board chairman, a financial director and a working-level official of the exchange “allegedly opened a fake account around September last year,” the news outlet conveyed. The prosecutors said the officials “made bogus orders worth 254 trillion won (US$226.2 billion) over a period of about two months to inflate the currency transactions and lure more customers,” the publication detailed, adding:

While rigging transactions, they actually sold 11,550 bitcoins to around 26,000 customers and pocketed 150 billion won.

Upbit is currently the largest cryptocurrency exchange in the country, with over 50 percent domestic market share. With an adjusted 24-hour trading volume of almost $1.1 billion at the time of this writing, the exchange currently ranks as the world’s third-largest crypto exchange, according to Coinmarketcap.

Upbit Denies Allegations

Officials at Top Korean Cryptocurrency Exchange Upbit Indicted for FraudYonhap also reported that Upbit “strongly denies the allegations.” The investigation into the exchange’s operations started eight months ago.

On Friday, the Kakao-backed exchange released a detailed explanation of what happened. “First of all, we would like to express our deepest regrets for causing much anxiety aroused by the indictment,” the exchange began. “The case is related to some transactions during a three-month period [last year], from Sept. 24 to Dec. 31.” Noting that its exchange was launched on Oct. 24, Upbit explained that all transactions in question were from “when our company was preparing for and had just launched Upbit service. All transactions which took place in Upbit after that period are not related to the case.” The exchange wrote:

Upbit did not commit wash trading (cross trading), imaginary orders (provision of liquidity), or fraudulent trading. The company did not trade cryptocurrencies which it didn’t own, or have its staff and employees benefit from such trading.

Upbit continued to explain that “Liquidity has been provided through a corporate account, and no one was swindled out of benefits or engaged in fake trading during the process.” Upbit, however, admitted that “For about two months after launching the service, some cross trading took place for marketing purposes.” Nonetheless, the exchange claims that “such trading had no influence on the market price, and the volume of such trading took up about 3% of the total trade volume at that time.”

The exchange also noted that its auditor has confirmed three times — on Jan. 19, June 28, and Oct. 8 — that its combined cash and cryptocurrency balance exceeds the amount owed to customers. “As of Oct. 8 when the most recent audit took place, Upbit held about 103% of the cryptocurrencies payable to customers. Also, Upbit’s bank balance is 165% of the cash payable to customers,” claimed the company’s statement released on Friday.

Do you think Upbit is guilty? Let us know in the comments section below.

Images courtesy of Shutterstock and Upbit.

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Bithumb Accused of Inflating Reported Trading Volume


An investigation conducted by Crypto Exchange Ranks (CER) has alleged that Bithumb, the largest Korean digital currency exchange by volume, has drastically inflated its reported trade volume during the second half of 2018. The report asserts that a number of irregular patterns identified in Bithumb’s trade activity suggest “apparent trade manipulations being performed.”

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Report Accuses Bithumb of Dramatically Inflating Trade Volume

Bithumb Accused of Inflating Reported Trading VolumeResearch carried out by CER alleges that Bithumb uses “various trade volume manipulation techniques” to inflate its reported trade activity. The report also alleges that the exchange uses a “multi-factored approach” to conceal the volume irregularities.

The analysis asserts that Bithumb was ranked at the lower end of the top 10 exchanges by volume according to Coinmarketcap at the start of September 2018, posting approximately $350 million in daily trade.

The report notes that Bithumb’s 24-hour volume suddenly increased to over $1 billion during the second week of October, with the exchange’s purported volume continuing to rise before peaking on Nov. 11 with Bithumb ranked as the largest exchange by reported daily volume with $4.4 billion – more than ten times the average 24-hour volume posted during summer.

Three Irregularities Identified in Bithumb BTC Trade Volume

The report identifies three features of Bithumb’s recently reported BTC volume that it found to be indicative of manipulative practices.

Bithumb Accused of Inflating Reported Trading VolumeThe first feature points to “a significant rise in volume” that appeared to occur daily from Aug. 25 until Nov. 12 in which a large “comb-like” spike in trade activity is posted during the first minutes of 11.a.m local time that comprised between 90 percent and 95 percent of 24-hour trade volume. previously reported on the 11 a.m. Bithumb volume spike following suggestions that the daily surge in trade activity was a result of a trader or traders seeking to take advantage of the exchange’s 120 percent fee payback promotion through wash trading.

The second period, running from Oct. 8 until Nov. 11, was characterized by “irregular trade volumes not aligning with price moves.” The analysis found that said trading activity drove a rise in daily trade volume from 22,000 BTC on Oct. 8 to a peak of 106,000 BTC on Nov. 6, before volume dropped by more than 56x to 1,538 BTC on Nov. 12, down from 87,000 BTC during the previous day.

Lastly, the report notes an accelerated increase in the daily average transaction size executed on Bithumb. The analysis found that the average daily transaction size increased 8.7x from 0.21 BTC during the period preceding Aug. 25 to 1.83 BTC by Oct. 15, before posting a peak of 5.88 BTC on Nov. 11. Since Nov. 12, daily average transaction size has fallen to 0.17 BTC.

Daily Volume of Altcoins Exceeds Market Cap on Multiple Occasions

Bithumb Accused of Inflating Reported Trading VolumeThe report identifies a number of unusual patterns in the reported volume for a number of the most heavily traded altcoins on Bithumb from between Jun. 1 and Nov. 22, including LTC, ETC, XMR, ZEC, DASH, BTG, OMG, QTUM, and WTC.

Over the examined period, the report states that WTC saw the most intensive burst in reported trade activity, with daily volume of increasing by 350x from 348,000 WTC to 122.5 million WTC “on average during the pump.” WTC’s daily trade volume on Bithumb would then drop by 1,450x in a single day, falling from 206.7 million WTC to 141,800 WTC on Nov 12.

Daily volume was found to have exceeded the total capitalization of WTC by multiple factors on several instances, including on Nov. 8 when trade activity was four times that of WTC’s market cap.

The 24-hour trade volume for OMG and BTG were also “inflated to levels exceeding their capitalization,” with OMG daily volume reaching 3.5x its capitalization on Nov. 28, and BTG posting volume 1.8x its market cap on Nov. 22.

Do you think that Bithumb’s reported volume is inflated? Share your thoughts in the comments section below!

Images courtesy of Shutterstock

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