Coinbit Exchange Raided Over $85 Million Illegal Income

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  • Coinbit has been raided by police amid accusations of trading manipulation
  • The exchange owners are accused of earning some $85 million through wash trading and artificially manipulating token prices
  • Wash trading is still prevalent in the crypto space

Korean cryptocurrency exchange Coinbit has been raided by police on suspicion of illegally obtaining $85 million worth of profit through wash trading and manipulation. According to Soul News, Coinbit, the third largest exchange in the country, had been inflating transaction volume and manipulating the market using ghost accounts to artificially raise the prices of tokens on the exchange, resulting in some 100 billion won ($85 million) of income they would otherwise not have received.

Coinbit Used “Bicycle Transactions”

According to Soul News, police raided the Coinbit offices yesterday morning following a tip off from an insider who was concerned about the activity that was taking place. The insider reported the illegal activity to the newspaper back in May, claiming they could prove that 99% of all transactions were manipulated.

The insider claimed that the exchange was engaging in ‘bicycle transactions’. This involved internally created and operated ‘ghost’ accounts artificially bidding up the value of a token and encouraging others to trade, earning the exchange money through fees. This also had the effect of increasing the volume on the exchange, making it look busier and therefore more attractive to traders than it actually was.

Analysis of the Coinbit books has apparently revealed that between August 2019 and May 2020), 99% of the total sales were found to be transactions that had no deposit and withdrawal details connected to them.

Wash Trading Still Abounds

Wash trading and other fraudulent activity is commonplace on cryptocurrency exchanges, of which many remain unregulated. A 2019 report from CoVenture found that 87% of all the reported volume on the top 25 exchanges was falsified, while just last month three Coinsquare executives were charged with wash trading on their exchange having allegedly faked 90% of their trading volume since mid-2018.

If the charges against Coinbit are true, they will be able to add their name to the less than illustrious list of known market manipulating exchanges.