The third largest cryptocurrency exchange in South Korea, Coinbit was seized by police following allegations of fraud. According to an August 26 report from Seoul Shinmun, 99% of the transaction volume on the stock exchange was falsified by “laundromat”.
The Seoul Metropolitan Police raided and seized several properties, including the Coinbit headquarters in the Gangnam district of Seoul.
The owner of Coinbit, the president Choi Mo and his management team are accused of increasing the volume of transactions and manipulating token prices using various ghost accounts.
Police estimate that the fraudulent activity totaled more than 100 billion won ($ 84.26 million) in total.
Seoul’s Shinmun was made aware of an alleged laundry trade on the stock exchange by an insider in May. Upon investigation, he found that Between August 2019 and May 2020, 99% of the transactions on Exchange 1, on which important cryptocurrencies such as Bitcoin (BTC) were traded, did not have the corresponding deposit and withdrawal dates.
He also discovered that the Exchange 2, which mainly comprised smaller cryptocurrencies, blocked coin transactions with other exchanges so Choi and his team could control the delivery of coins.. This allowed the management team to get the market margin directly by buying and selling large amounts of coins at certain times.
The publication of the results of the investigation was postponed until after the police operation due to concerns about personal safety and the destruction of evidence.
Exchange washer trading is a major concern for the cryptocurrency industry as fraudulent daily volume claims trick many legitimate traders into using exchanges with low liquidity.