FSC (South Korea): UPbit faked its balance sheets and deceived investors

upbit exchange

A fraud investigation into UPbit, South Korea’s largest crypto exchange, has widened into a government task force review of all existing regulations.

South Korea has now widened its probe into record manipulation in the country’s booming crypto-currency trading market after the Seoul Southern District Prosecutors’ Office raided the offices of the UPbit exchange on Friday.

The investigation into UPbit, which is South Korea’s largest exchange and the world’s third-largest market in terms of daily transactions, is due to the levels of reported crypto-currencies sales.

“Our latest findings show that [UPbit] faked its balance sheets and deceived investors,” an official told Korea Times.

The wider probe is being handled by an inter-department task force that will include investigators from the Financial Supervisory Service (FSS) of South Korea, the Korean Financial Intelligence Unit and the Financial Services Commission (FSC).

According to Korea Times, the investigation will now be extended to the country’s second largest crypto exchange, Bithumb, and will examine both corporate bank account records and the liquidity of the exchanges and is also collaborating with authorities in other countries.

The task force will examine if exchanges are inflating the crypto holdings they say they own or if they are also processing trades on behalf of clients without actually moving the funds. The government says exchanges must be able to prove, through formal audit reports, the actual status of their accounts and regulators say they will now go on to also review all existing South Korean crypto-currency regulations.

In March, Upbit announced it was launching its own system to “prevent damage due to illegal fraud and to create a sound crypto-currency ecosystem” by launching a new reward-based system aimed at getting its users to identify illegal ponzi scams that pose as crypto-currencies or ICO tokens. Those who find and report scams would be rewarded with cash prizes.

The move came after authorities started a series of crackdowns against excessive speculation, ponzi-type scams and suspected money laundering by banning ICOs and anonymous trading and also by raiding several smaller crypto businesses.

Upbit, which moves approximately $1.6 billion worth of crypto-currency trades a day, acknowledged the raid on Friday via a client notice and said it was co-operating with authorities and that its trading platforms and client investments remained unaffected.

South Korea holds an influential place in the global crypto-currency market and, according to data from Bloomberg, only the US dollar is used more than the Korean won in major crypto trades.

The South Korean currency accounts for something like 10% of all global Bitcoin trades. Global crypto prices fell sharply following the Friday raid on Upbit, but have since rallied. Bitcoin, which sat at above $9,300 on Friday, fell as low as $8,300 on Sunday and was now hovering around the $8,700 mark.

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