Two executives of a South Korean cryptocurrency exchange have reportedly been sentenced to jail for inflating trading volumes on their exchange. The pair allegedly used a bot to fake large orders in both cryptocurrencies and Korean won.
Two executives of South Korean cryptocurrency exchange Komid were sentenced to jail on Thursday “for their roles in orchestrating fraudulent trading volume reports on their platform,” The News Asia reported.
One of the executives is the CEO of the exchange, Choi Hyunsuk. He received a three-year prison sentence while the other executive received a two-year jail sentence, Maekyung publication detailed, asserting:
This is the first time a representative of a virtual currency exchange has been sentenced to prison for allegedly inflating trading volumes.
Komid began operations on Jan. 5 last year after beta test runs. According to the court, Choi created more than five fake accounts in January last year and inflated trading volumes in both cryptocurrencies and Korean won on his exchange. The two were sentenced to prison “for fraud, embezzlement, and misconduct,” The News Asia noted, elaborating:
The charges from prosecutors outlined a scheme wherein the two defendants fabricated 5 million transactions on their platform to deceive investors into thinking that the volume was natural. This led to the two earning about $45mil. There is also a suspicion that they utilized a ‘bot’ to automatically create large orders, which attracted new users.
The judge explained that “Choi has committed fraud for a countless number of victims for a long period of time,” the news outlet conveyed. “There is a need for punishment because the damage caused by the creation of false electronic records is large,” Maekyung quoted him as saying.
However, Edaily reported that the judge took into account the fact that the damage was minimized as some funds were returned. In addition, he found that “The defendants did not appear to have committed a crime with strong fraudulent intentions.” Nonetheless, he concluded:
The crime has damaged customers’ confidence in the virtual currency exchange and has had a negative effect on the domestic virtual currency trading market.
Cryptocurrency exchanges have been caught using trading bots to falsify orders since the early days of Mtgox. In December last year, officials of one of the country’s largest crypto exchanges, Upbit, were indicted for fraud. They allegedly faked orders worth approximately $226 billion and sold 11,500 BTC to about 26,000 investors. Upbit has denied the allegations.
Other domestic crypto exchanges in a similar bind include Coinnest, whose executives were indicted in September last year for accepting a bribe. Moreover, employees of crypto exchange HTS Coin were arrested in September last year on suspicion of fraud and embezzlement.
What do you think of Komid’s executives being sentenced to prison for faking volumes? Let us know in the comments section below.
Images courtesy of Shutterstock and Komid.
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