Source: iStock/sakhorn38

Police in Seoul say they have arrested employees from “at least two” South Korean cryptocurrency exchange platforms, including Coinnest.

Media reports in the capital claim that Kim Ik-hwan, Coinnest’s CEO and co-founder, was among those arrested, but police have so far refused to confirm the identity of the suspects. Coinnest is considered to be one of the biggest platforms in South Korea, and, along with Coinone and Korbit, heads the chasing pack behind the “big two”: Bithumb and Upbit.

This marks the first time the head of any South Korean cryptocurrency exchange platform has been arrested. Police have not yet revealed the name of the second exchange platform, which is also believed to be Seoul-based, but smaller in size than Coinnest.

Per media outlet Hanguk Ilbo, a spokesperson for the South Korean Prosecution Office stated, “Police have arrested four people, including the CEOs of two cryptocurrency exchanges, as well as two senior executives. The four have been charged with embezzlement and fraud."

Prosecutors say the accused had diverted customers’ funds amounting “hundreds of billions of Korean won” (1 billion won = USD 940,000) into personal cryptocurrency accounts.

Police say that they are also looking into charging the four arrestees with further offenses, including commercial law violations.

The Seoul branch of the Financial Supervisory Service last month investigated three exchange platforms located in the Yoido district of Seoul – Coinnest included – arresting a number of employees and seizing financial records. The raid is said to have unearthed further irregularities at the exchanges, leading the police to widen the scope of their investigations.

Police said they noticed a number of suspicious transactions occurring at the exchanges, as well as commission fee irregularities.

Media outlet Seoul Kyungjae says that the exchanges at first tried to claim all irregularities were the result of administrative errors, but quickly changed their tune as the investigation deepened.

Coinnest’s international backers include Bitmain and Quantum, and the company last month signed a partnership deal with the influential Graduate School of Information Security at Seoul’s elite Korea University.

Among 212 exchanges followed by Coinmarketcap, Coinnest is 67th in terms of daily trading volume (USD 6.3m).

Coinnest is yet to comment on the matter.