South Korean cryptocurrency exchange Coinbit has reportedly been seized by the Seoul Metropolitan Police Agency for allegedly inflating its trading volumes via wash trading.
According to South Korea’s oldest newspaper, the Seoul Shinmun, Coinbit’s offices have been raided by authorities for the alleged wash trading. The cryptocurrency trading platform is said to have manipulated its volumes to the point 99% of the volume was created via wash trading in recent months.
This activity, authorities allege, led to “unfair profits” of at least 100 billion won (roughly $8.4 million) for the cryptocurrency exchange and its team. The platform’s accounting practices are also reportedly poor.
According to researchers, Coinbit’s owner Choi Mo and other team members manipulated trading volumes via two main exchange accounts containing all user funds. Using one account they traded major cryptocurrencies – including BTC, ETH, XRP, and USDT – with “ghost” accounts to inflate trading volumes.
With the other one, they traded little-known altcoins by controlling their supply and manipulating their prices. These tokens were then eventually dumped on retail investors. Coinbit has halted operations amid a police investigation into it.
In light of the situation Doo Wan Nam, MakerDAO’s business development associated for the Asia-Pacific region, suggested decentralized exchanges are a way to avoid being affected by such practices.
Several branches of Coinbit’s offices are reportedly blocked at press time, as investigations are ongoing. The situation is said to have affected the trading platform’s over 250,000 monthly active users.
Featured image via Unsplash.