South Korean cryptocurrency exchange, Komid, is in news this week due to the the arrest of two senior officials of the firm, including it’s CEO.
The two leaders have been sentenced to serve jail terms for faking the exchange’s trading volumes.
In an article by the local media, the exchange’s CEO, named Choi, was sentenced to 3 years in jail while another, unnamed employee, who is said to have been involved in fraud, embezzlement and misconduct, received a 2 year jail sentence.
The Fake Game
In a cleverly devised strategy, the exchange faked 5 million transactions, making a windfall of $45 million due to the highly inflated trading volumes. The involvement of a software or a bot, which would have helped their cause in generating huge amounts of fake trading history, is largely suspected.
The judge delivering the sentences said:-
“Choi has committed fraud for a countless number of victims for a long period of time…He holds the financial authorities responsible for failing to keep track of the industry better.”
In the past few months, the cryptocurrency market has seen numerous attempts by exchanges around the world that invest in dubious planning schemes to increase their inventories by faking transactions.
Reports suggesting that firms that had taking up to fudging their account logs due to high amounts of virtual currency commissions becoming a major income source. One such report states:-
“In the case of Upbit and Bithumb, the largest exchanges in Korea, daily average commission income is estimated at 3.6 billion won and 2.6 billion won, respectively.”
With such startling figures involved, there remains little doubt as to why a growing number of exchanges have resorted to such malpractices.
Finally, the onus remains on regulators to oversee the daily operations of exchanges in a more scrutinized manner because defamation of even a single exchange can weigh heavily indeed on the regulatory bodies concerned.