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One of S Korea’s Biggest Exchanges Hit with Shock Fraud Wrap

Fraud Upbit

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Tim Alper

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Tim Alper

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Tim Alper is a British journalist and features writer who has worked at Cryptonews.com since 2018. He has written for media outlets such as the BBC, the Guardian, and Chosun Ilbo. He has also worked...

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Last updated:

June 26, 2023

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Prosecutors in Seoul’s Gangnam district have raided the offices of Upbit, arguably the country’s biggest cryptocurrency exchange platform.

Per multiple reports from South Korea’s biggest news agencies, prosecution officers stormed Upbit’s offices on May 10 and 11, seizing hard drives and accounting ledgers, with police suspecting Upbit has falsified official financial records.

Media outlets say prosecutors believe Upbit has claimed its cryptocurrency holdings are higher than they actually are – as part of a wider effort to deceive investors. Per news agency Yonhap, prosecutors obtained a search warrant on suspicion of “fraud and embezzlement.”

Bitcoin and altcoins tumbled following reports.

Upbit has yet to comment directly on the news, but this afternoon posted an announcement on its official website, warning of the potential dangers of trading in cryptocurrencies. The announcement reads, “Cryptocurrencies are traded around the world, 24 hours a day, 365 days a week, and can be exposed to rapid fluctuations due to speculative demand, as well as changes to the Korean and overseas regulatory environment.”

Per Ilyo Shinmun, prosecutors are also investigating the role played in this case by the company’s president Lee Seok-woo. Lee is the co-founder and former CEO of Upbit’s parent company, KakaoTalk, part of the Kakao Group – one of South Korea’s biggest tech companies. He left his position as CEO in 2015 under a cloud, after charges blaming him for preventing the spread of child pornography on Kakao services. Late last year, he was nominated as the new chief of Dunamu, Upbit’s operator.

Crytpocurrency prices have plummeted in the country the wake of the news, although Upbit appears to still be trading in all currencies at the time of writing.

A software developer at another South Korean exchange told Cryptonews.com, on condition of anonymity, “I am flabbergasted. Everyone thought Upbit was totally above this sort of thing, due to its high standing. Most users trust Kakao implicitly. If this is true, it changes everything for the entire industry. The government is now very likely to crack down on exchanges – at least in the form of new regulations. There is bound to be fallout.”

News outlet Joongang says Upbit is the fourth largest stock exchange platform in the world in terms of 24-hour trading volume, and the company has vied with rival Bithumb for the national top spot in recent years.

Cryptocurrency forums on Naver and Telegram have been trying to investigate the meaning of this mysterious post, and speculated on its timing. The company, however, has refrained from further comment.

The news comes just over a month after the CEO of one of South Korea’s medium-sized exchanges, Coinnest, was arrested and charged with fraud and embezzlement, along with the head of another as-yet-unnamed Seoul-based exchange.