UPbit Exchange Raided, Crypto Markets Reel

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Authorities in South Korea raided the UPbit cryptocurrency exchange’s offices on Thursday and Friday, according to multiple media reports. Prosecutors reportedly believe that the exchange had deceived customers by selling digital currencies that it did not hold. News of the raid appears to have contributed to a broad decline in cryptocurrency prices on Friday.

Korea Joongang Daily described the alleged fraud:

“The company allegedly allowed the trading of cryptocurrencies it didn’t own by rigging its system to indicate that the coins were in its possession. Upbit is suspected of “paper trading,” as the number of cryptocurrency wallets it has access to is considerably smaller than the amount of cryptocurrency traded on its platform.”

Reports indicate that the company’s Gangnam District offices were searched by the Seoul Southern District Prosecutor’s Office. Authorities reportedly seized the company’s account books and computer drives, and plan to conduct an audit to examine the exchange’s holdings.

UPbit published a brief notice to its customers on the company’s website, noting that the exchange planned to cooperate with the investigators:

“The company will cooperate faithfully in prosecutors’ investigation. All the services of Upbit are operating normally and the traders’ assets are securely stored in your account, so we ask our customers to be at ease using our service.”

South Korean officials have intensified their scrutiny of the country’s cryptocurrency exchanges in recent months. Similar raids were reported at three other exchanges in March, including a raid at the Coinnest exchange. That company’s CEO has been accused of embezzling customer funds by transferring it into his own account.

UPbit is the largest digital currency exchange in South Korea by trading volume and ranks fourth among the world’s fee-based crypto exchanges. Bloomberg reports that the exchange was host to roughly $1.6 billion in trading activity over the last 24 hours. This week’s raids may bring even greater scrutiny to the crypto exchange industry and intensify the debate over regulation of the space.

In recent weeks, Bitcoin has been poised to once again break through the $10,000 price barrier, as bullish sentiment seemed to be growing. Recent criticism from notable financial players dampened that excitement at least temporarily. Market watchers have cited the UPbit news and reports that the Mt. Gox trustee has dumped an additional 8,000 Bitcoins into the market as contributing factors in Friday’s crypto price decline.

Author: Ken Chase

Freelance writer whose interests include topics ranging from technology and finance to politics, fitness, and all things canine. Aspiring polymath, semi-professional skeptic, and passionate advocate for the judicious use of the Oxford comma.

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