The third largest crypto exchange in South Korea, Coinbit, has been seized by police after allegedly faking most of its trading volume, Seoul Shinmun reported on 26 August.
According to the publication, the Seoul Metropolitan Police raided and confiscated a number of the company’s properties, including its headquarters in the Gangnam district of Seoul. Coinbit’s owner, Choi Mo, and his management team have also been accused of fraud, for artificially inflating the exchange’s volume and manipulating token prices through the use of “ghost” accounts, a practice known as wash trading.
The news outlet had been notified by insiders months ago, that the firm had faked up to 99% of its trading volume, but kept quite on the request of the Investigation Department of the Seoul Metropolitan Government, due to concerns about destruction of evidence. The police has estimated that through wash trading, Coinbit netted around 100 billion won ($84 million) in total.
Through its investigation, the newspaper found that between August 2019 and May 2020, around 99% of the transactions on Exchange 1, which handles major cryptocurrencies such as Bitcoin, could not be associated with any deposits or withdrawals. On the other hand, Exchange 2, which deals with lesser cryptocurrencies, had coin transactions with other exchanges blocked, which allowed the Coinbit team to manipulate the supply and prices of those coins.
This news comes as no surprise, considering the Blockchain Transparency Institute released a report towards the end of 2018, claiming that around 80% of the trading volume in top-volume pairs was fake. At the time, the study claimed that Coinbit, among others, only had as little as 1% organic trading volume – with the rest being completely fake.