Since the South Korean prosecution started investigating Upbit, the country’s largest cryptocurrency exchange, more events have unfolded. While local media still discuss allegations and raise questions about Upbit’s business practice, some people believe that Upbit is already in the clear. The investigation continues.
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The Allegations
Local media reported on Friday that South Korea’s largest cryptocurrency exchange, Upbit, is under investigation for alleged fraud. More information has surfaced since, casting doubt on whether the allegations can be considered fraud. No charges have been filed against Upbit at the time of this writing. However, the prosecutors have confiscated the exchange’s computers and records as part of the investigation.
On Monday, News1 Korea described:
Prosecutors searched Upbit for fraud charges triggered by coinless transactions, suspicion of insider trading during the listing process, and allegations of money laundering and leakage of money through US trading sites.
Liquidity Issue
The first allegation, the most heavily scrutinized, concerns the liquidity of some of the coins listed on Upbit.
The exchange currently lists 137 cryptocurrencies but not all of them have wallets. South Korean prosecutors are accusing the exchange of “book-trading” where Upbit facilitates the trading of cryptocurrencies without actually having the coins in its possession. Joongang Ilbo elaborated:
Of the more than 130 cryptocurrencies currently traded on Upbit, about 40 do not support e-wallets.
News1 also pointed out that there is a viewpoint among investigators that if users request a transfer or withdrawal of their coins all at once, then Upbit will not be able to return their money immediately, which would render the original transactions fraudulent.
However, some argue that “most domestic trading sites are adopting this method” except those
