Three executives at Upbit, the largest crypto exchange in South Korea, have been charged by law enforcement for fraud.

A person places a great deal of trust with a cryptocurrency exchange. They expect that their funds will remain secure and that the platform will operate with integrity. However, the lure of the vast money associated with the cryptocurrency ecosystem is one that some find hard to resist. News has broken that three officials with Upbit, the largest exchange in South Korea, have been indicted for fraud.

Law Enforcement Nabs Upbit Personnel

Local media outlets are reporting that authorities have charged three officials at the exchange for making a lot of fraudulent transactions. The people charged are a board chairman, a financial director, and a working-level employee.

The Seoul Southern District Prosecutors’ Office says that the three worked together to process 254 trillion won (roughly $226 billion) of fake transactions in order to attract new users by inflating the market. This scheme took place over a two-month period last fall.

Prosecutors also claim that the exchange made a handsome profit as well from the scheme. Local media says that while the fake transactions were going on, a total of 11,500 bitcoins were sold to roughly 26,000 customers. This allowed the exchange to net a tidy 150 billion won ($132 million) profit.

Exchange Says They’re Innocent

Upbit has posted a blog that says the exchange did nothing wrong and that no fraudulent orders were made. The exchange says that the indictments are based on a “difference of opinion on the transaction method.”

The blog says that the trades made during the specified time were part of a marketing scheme, saying:

For about two months after launching the service, some cross trading took place for marketing purposes. However, such trading had no influence on the market price, and the volume of such trading took up about 3% of the total trade volume at that time.

The exchange also says that the transactions were done to create liquidity and provide market stability, all to protect the consumer. The blog states:

To protect the customers from the drastic change of market price and make the market stable, Upbit used the actual assets (about 200 ~ 300k USD per cryptocurrency) to provide liquidity back then. Clause 254 of the Prosecutors’ Announcement did not consider the basic characteristic of liquidity provision where previous orders are canceled and new orders are submitted on the change of market price.

How this will shake out is anybody’s guess. South Korea has clamped down on the crypto marketplace through ever-tightening regulations. Scrutiny of exchanges has increased, and law enforcement arrested 11 people from three different exchanges earlier this year for fraud and embezzlement.

Currently, Upbit is the thirteenth largest exchange in the world, boasting a 24-hour trading volume of $345,696,090, according to CoinMarketCap.

What do you think about this situation? Is Upbit innocent or is their explanation hot air? Let us know in the comments below.

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