Seoul Metropolitan Police Agency seized Coinbit, the third-largest cryptocurrency exchange in South Korea, for allegedly faking 99% of its trading volumes through wash trading.
A wash trade is a form of market manipulation in which an investor simultaneously sells and buys the same asset to create misleading and artificial activity in the marketplace deemed illegal in most jurisdictions.
According to a report from Seoul Shinmun, South Korea’s oldest newspaper, police accused Coinbit Owner Choi Mo and other managers of handling multiple accounts, raising transaction volume, and controlling cryptocurrency prices.
It has been found that between August 2019 and May 2020, the crypto exchange has earned dishonestly over 100 billion won ($84m) in profit.
Authorities disclosed that the exchange has split into two functional accounts. The first account consists of major cryptocurrencies like Bitcoin (BTC), Ethereum (ETH), Ripple (XRP), and Tether (USDT). Here the trading was done with ghost accounts to inflate the trading volumes.
The second account contains only smaller crypto and altcoins, wherein crypto transactions with other exchanges were stopped, enabling Choi and his team to control the supply. With this strategy, they were able to directly analyze the market margin by trading large amounts of coins at certain times.
The report findings were withheld to the public until the police completed their investigation. As of press time, Coinbit declined by -2.16% (7d) in terms of trading volume.
Coinbit only had 252,000 visitors within the last three month, being overtaken by Bithumb and Upbit. The number of affected customers by the incident were still unknown at this time. As South Korea continues to draft crypto laws, there is concern that more attacks like these could follow.
Similar to this, the executives of UPbit, also one of South Korea’s largest cryptocurrency exchanges, have made fraudulent transactions using a fake corporate account to make bogus orders worth 254 trillion won ($226.2 billion) to inflate trading volume back in December 2018.