Execs from ‘99% fake’ exchange face charges over market manipulation

South Korean authorities have charged executives of what was once the country’s third-largest cryptocurrency exchange, Coinbit, over market manipulation allegations.

According to news outlet News1, prosecutors are preparing a case against Coinbit chairman Choi Mo and two unnamed executives on charges of fraud and forgery connected to market manipulation following a recommendation from the Seoul Metropolitan Police Agency. The police said that the three allegedly used ghost accounts from August 2019 to May 2020 to inflate transaction volumes and manipulate token prices on the exchange.

The police searched and confiscated a number of properties associated with Coinbit in a series of August raids. At that time, authorities estimated that 99% of the exchange’s volume had been faked by wash trading Bitcoin (BTC) and other cryptocurrencies and that those responsible for the exchange’s fraudulent activities had netted more than $84 million.

An investigation from news outlet Seoul Shinmun in August alleged that Coinbit showed no corresponding deposit and withdrawal details for major cryptocurrency transactions, and had blocked transactions with other exchanges. This allegedly allowed the Coinbit chairman and others to manipulate the market by buying and selling large quantities of tokens at certain times.

According to Thomas Reuters Practical Law, engaging in fraud in South Korea using unfair trading practices such as providing inaccurate market prices can result in a prison term from anywhere between five years to life if profits gained through the fraud are more than 5 billion KRW — roughly $4.6 million at the time of writing. In addition, the guilty parties can be fined “up to the amount of profit gained.”