Upbit Staff Arrested Over Fake Trading Volume Investigation

Reading Time: 2 minutes

Fake trade volume has long been a part of the crypto trading world as exchanges vie for the top spot in trade volume rankings. However, a recent report blew the scandal wide open and exchanges are being investigated around the world. In South Korea, several members of staff from Upbit have been arrested over $250 billion worth of fake trade volume.

Faking Liquidity

A board chairman, a financial director, and a staffer from Upbit have been arrested in South Korea over the charges. The Supreme Prosecutors’ Office of the Republic of Korea alleges that the trio created an account and deposited around $110 million. They then used this money to create fake liquidity and boost the exchanges trade volume rankings in a bid to draw in new traders. They used this account to dupe investors by making large trades between September and December 2017.

Upbit Denies the Allegations

It would be weird for a crypto exchange to admit to these allegations, so there is no surprise that Upbit has vehemently denied these claims. In a statement published in the Yonhap News, Upbit said:

For eight months of investigation, our company has sincerely explained to the Prosecutor’s’ Office about the case. Upbit did not commit wash trading (cross trading), imaginary orders (provision of liquidity), or fraudulent trading. The company did not trade cryptocurrencies which it didn’t own, or have its staff and employees benefit from such trading.

Nearly Out of the Woods

This new scandal comes as another huge blow for the embattled crypto exchange. In May, Upbit’s headquarters were raided following allegations that it wasn’t holding enough money in its accounts to cover all investor deposits. Thankfully, after a lengthy investigation, the correct amount of money – with a surplus – was found to be in the exchange’s bank accounts. This looked like Upbit was finally out of the woods and was ready to get back to business, but this new scandal changes everything.

A Massive Allegation

If Upbit staff members were only being accused of $110 million worth of fake trade volumes it could be easily forgiven, but $250 billion is a whole different level of crime. If this enormous amount of fake trade volume can be verified as accurate, then these three staff members could be going to jail for a very long time – it’s financial fraud on the highest level.
Wash trading is a common occurrence in the crypto exchange world and is a practice carried out by a number of exchanges looking to boost their trade volume rankings. While it’s illegal, exchanges still take the risk in the hope of attracting new traders to the platform. However – as Upbit has demonstrated – the authorities will always catch up with these exchanges in the end.