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Head of South Korea’s Biggest Crypto Exchange ‘Not Guilty’ of Data Manipulation

Tim Alper
Last updated: | 2 min read
A person holds a smartphone next to two laptop screens. The smartphone displays the Upbit logo.
Source: vladim_ka/Adobe

The head of Dunamu, operator of South Korea’s market-leading Upbit crypto exchange, has been found not guilty of manipulating platform data.

Per Chosun Ilbo, the nation’s Supreme Court acquitted the Dunamu Chairman Song Chi-hyung, of fraud charges under the Aggravated Punishment Act for Specific Economic Crimes.

Prosecutors alleged Song and a group of executives with Chairman Song with manipulating order volumes by creating fake member accounts on Upbit between September and November 2017.

They claimed Song and others had created accounts in the name of customers who did not actually exist.

Dunamu Chairman Song Chi-hyung speaking at an event hosted by Seoul National University in 2021.
Dunamu Chairman Song Chi-hyung speaking at an event hosted by Seoul National University in 2021. (Source: Seoul National University/Seoul Kyungjae/YouTube)

Prosecution officials said Song and the executives used these bogus accounts to buy and sell Bitcoin.

They said the group moved BTC 11,550 around 26,000 wallets to artificially boost trading volumes.

They claimed the executives had carried out almost $93 million worth of transactions in this manner, helping swell Upbit’s volume figures.

And they claimed the “fake customer” transactions had helped the group make money, trading at the height of the bear market – and generate profits worth almost $114 million.

A district court cleared Song and the executives of the charges, and a branch of the high court upheld this decision.

But prosecution officials were determined to try again, taking the case to the Supreme Court.

However, all three courts agreed that the prosecution had used “illegal methods” to obtain evidence.

A graph showing trading volumes on the Upbit crypto exchange over the past 12 months.
Trading volumes on the Upbit crypto exchange over the past 12 months. (Source: CoinGecko)

Why Was South Korean Crypto Exchange Chief Cleared of Charges?

The court heard that prosecution officials had “illegally accessed” information from Dunamu’s Amazon-provided cloud accounts.

Prosecutors had been granted conditional search and seize warrants in their initial investigation, defense attorneys argued.

But lawyers said the warrants did not grant officers the right to search remote servers.

Defense lawyers also argued that prosecutors had overstepped their authority by seizing executives’ laptops and USB storage devices.

The same court also cleared the firm’s Chief Financial Officer and Data Office Director of charges of forgery and fraud.

Despite initially lagging behind its closest rival Bithumb, Upbit has recently risen to become the undisputed market leader in South Korea’s crypto scene.

The exchange now accounts for some 80% of the domestic market, thanks in no small part to its wildly successful partnership with the neobank K Bank.

This partnership has allowed new customers to open wallets and associated bank accounts online.

The nature of South Korean regulation requires crypto traders to create special real-name verified bank accounts linked to their wallets.

As such, some banks require new crypto exchange customers to visit branches in person to set up their accounts.