Korean exchange Coinnest will probably be handing out a few disciplinary actions after it emerged that $5 million in Bitcoin had accidentally been sent to traders. The airdrop error was in place of intended We Game Tokens (WGT) and caused a frantic 24 hours, where traders on the receiving end of the unintended bonuses attempted to withdraw the funds. This caused the price of Bitcoin on the exchange to drop by thousands of dollars, according to a report by Coindesk Korea.



The exchange has asked recipients to return the Bitcoin, along with some Korean Won which was also sent out. So far, around half the funds have been returned, but the process may prove to be fairly lengthy.



Back in 2018, Coinnest was in the news as a massive embezzlement case was brought against CEO Kim Ik-Hwan. Prosecutors at the time said that Mr. Kim and other suspects from different South Korean exchanges, “[were] are being questioned about the embezzlement of billions of won from their clients’ accounts and transferring it to their own.” Nothing appears to have come from this case though, but this latest setback for Coinnest will inevitably raise the ghost of 2018 again (as it has in this article).



This latest mistake adds to an already bad week for South Korean crypto exchanges. Just yesterday, two executives from exchange Komid received 2 and 3-year prison sentences for deception and embezzlement. According to Korean site Blockinpress [translated from Korean], “On October 17, the 13th Criminal Settlement Agreement of the South District Court in Seoul was sentenced to three years in prison and two years in prison for the in-house director, Park Mo, who was accused of misconduct, fraud, and embezzlement. Choi was arrested in court. They are suspected of making 5 million passwords and 50 billion won in false money by creating a nickname account at the exchange in January of last year. It has deceived investors as if it were operating normally without holding that much capital or cryptography. There is also a suspicion that he turned a "bot" that automatically creates large orders to attract customers.”



These latest issues, along with the other unnamed exchange-related arrests from the Coinnest 2018 case, will again raise ongoing questions about regulation within South Korea. The authorities have already beefed up KYC policies and imposed regulations on individuals and minors, but there is clearly still a lot more work to be done.



The specific problem in Korea is that crypto trading – particularly Bitcoin – is so massive and widespread, that there are a larger number of exchanges operating than in most other countries in the world. And while there are now regulations in place for new exchanges, which they must fulfil before receiving clearance to act as a cryptocurrency business, these haven’t yet been proven to be wholly effective.