Two executives from the Korean cryptocurrency Komid have been imprisoned for creating fake volume on the exchange in order to deceive investors, Korean media outlet Blockinpress reports.
Komid Choi has reportedly been sentenced in Seoul to three year’s imprisonment for fraud and embezzlement, and an accomplice, Park Mo, has been sentenced to two years.
Prosecutors claim the two created crypto trading accounts under false names and using specialized bot software to generate 50 billion won in wash trades on Komid and, “automatically create large orders to attract customers.”
The fakery was reportedly designed to give investors a false sense of liquidity and action on the exchange.
Court documents regarding the case, which was tried by Judge Sung state:
“Mr. Choi has repeatedly committed fraud against a large number of victims in an unspecified amount of time.”
The judge also claimed the accused said Korean financial authorities were remiss in not stopping his behaviour:
“The accused has been responsible for blaming the financial authorities and not regretting the mistake.”
In December, about one week after the CEO of the Korea’s largest crypto exchange Upbit delivered a keynote address to the Korean parliament on the regulation of crypto markets there, three employees at Upbit were were also indicted for inflating volumes on that exchange.
The Seoul Southern District Prosecutors’ Office claims the three conspired to place numerous fake crypto buy and sell orders over a period of two months last fall in order to inflate markets and attract more customers to the exchange.
Korea Herald (KH) claims Upbit profited considerably from sales fees collected while its employees executed the scheme:
“While rigging transactions, they actually sold 11,550 bitcoins to around 26,000 customers and pocketed 150 billion won ($132 million USD).”
According to KH, Upbit controls about 50% of the crypto trading market in Korea.
Upbit has denied the charges in an apologetic blog post regarding the prosecution, stating that the in-house trades were executed, “…(T)o protect the customers from the drastic change of market price…make the market stable…(and) provide liquidity for the purpose of protecting users from sudden price fluctuations by submitting sell and buy orders within the proper range of upper and lower price than the current price.”