Korean authorities have closed down Coinbit Exchange, the country’s third-largest cryptocurrency exchange, over allegations bordering on wash trading, inflation of transaction volume, among other illegal dealings to the tune of ₩100 billion Won, around $85 million, a local news magazine in Seoul has published.
According to Seoul Newspaper, Coinbit, with over 250,000 local customers, is now being investigated by the Seoul Metropolitan Police Agency’s department of investigation.
Already, the headquarters and some other offices of Coinbit have been closed down with the owner, Chairman Choi Mo, and his team placed under thorough investigations.
Authorities allege that the exchange is affecting its customers through wash trading, bicycle transactions,’ and creation of countless ghost accounts on the platform to hoodwink users.
A Crypto Secret Well Kept
The Seoul Newspaper’s Exploration Planning Department says it was alerted of the internal happenings in Coinbit in May and confirmed that 99% of transaction volumes on the exchange were manipulated.
To achieve its aim, the country’s Metropolitan Investigation Department sought that the Seoul newspaper conceals the information until the allegations are confirmed.
Between May and August 2019, the Coinbit’s management logbook indicates that the exchange was involved in a series of illegal trading activities.
During this period, 99% of the total trades on the exchange were discovered to be transactions without deposit and withdrawal details.
Also, the management in connivance with the chairman, was involved in manipulating the trading volume of Bitcoin, Ethereum, XRP, and USDT using ghost accounts.
While some other exchanges also involve in bicycle trading, it is illegal for exchanges to manipulate transactions with funds in books alone.
Coinbit: Two Exchanges in One
According to investigations, the exchange was sectioned into two. The first section trades new digital currencies, while the second exchange blocked withdrawal and deposit account to avert dealings with outside exchanges, making the management have control over the coin supply.
In April, Coinbit published an audit report. However, the report was rejected by an accounting firm. Besides, the report contained financial statements that were not perused by external auditors.
While external auditor demanded to look into the financial dealings of the exchange, the management rejected the offer vehemently; signifying that the report published in April was marred by financial irregularities and cannot be taken or trusted whatsoever.
Binance CEO on Wash Trading
Big exchanges are said to be involved in illegal trading. Binance CEO, Changpeng Zhao, had said that nothing less than 600 of cryptocurrency exchanges are involved in wash trading.
Wash trading, according to experts, is a major constraint for the development of cryptocurrency. In May 2018, a study discovered that “six in ten exchanges” report fake volumes.