Police in South Korea raided and seized the offices of Coinbit over allegations it faked 99% of its trading volume

According to a report from Seoul News, police in South Korea raided and arrested the offices of the Coinbit exchange in Gangnam on charges of falsifying 99% of its trading volume.


Police in South Korea raided and arrested Coinbit offices for allegedly falsifying 99% of transaction volume

The police accused the owner of the exchange, Choi Mo, and other regulators of “wash trading.” Wash trading is a form of market manipulation in which investors are simultaneously selling and buying the same financial asset to create false, misleading activity in the market. This is completely illegal in most jurisdictions.

For about a year until May 2020, the process fraudulently yielded Coinbit 100 billion Won ($ 84 million) in profits. In the case of Coinbit, functionally, this exchange is divided into two active accounts containing all users’ funds. Fraud in the first account involves significant cryptocurrencies such as Bitcoin, Ethereum, XRP, and Tether (USDT), which Coinbit employees have been continually moving back and forth between “ghost accounts.”

The other specializes in exclusively trading suspicious altcoins and ICO services. The company prevented transactions with outside exchanges so that owners and management could control the supply of the assets. Choi and his team manipulated this structure by trading enormous numbers of listed cryptocurrencies and then selling them to unsuspecting retail traders.

According to the report, the authorities are also questioning the possibility of other negligence and embezzlement. Authorities checked Coinbit’s books before reporting to the police. However, they declined the report at the request of the police. Even so, its investigations have uncovered a discrepancy in deposits and withdrawals of 99% of the trading volume.

Elsewhere, an accounting firm refused to work with Coinbit after reviewing their accounts. In April, South Korea’s Financial Supervisory Service also declined to sign the exchange’s financial statements, which have not been externally audited.

Coinbit has had 252,000 unique visitors in the past three months and has only been surpassed by Bithumb and Upbit in South Korea. Police investigations are underway. As South Korea drafted its crypto law, there was concern that many such arrests could occur.

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