South Korean Crypto Exchange Troubles: Upbit, Bithumb and Coinzest Go from One Disaster to the Next
Crypto adoption has been an uphill battle for the community with exchanges all over the world struggling for adoption and legitimacy amongst the general populace. After the struggles of the market, now of the major proponents of Digital assets, South Korea has been rocked by a slew of scandal in quick succession.
Rocked Like A Hurricane
The Korean crypto scene has had a number of high profile disasters. First, there was the news that Upbit was under investigation, followed by a sale controversy at Bithumb and then the cherry on top was Coinzest air-drop issues. All these and more have added to the general sense of discontent in the community.
Bithumb Sale And Token Issuance
Bithumb is arguably the largest Korean crypto exchange by volume. Last year it was sold off to a Consortium for a reported $354 million. This was greeted positively, however, after its acquisition in October last year, there were many news outlets claiming that the new owners were planning the pre-sale of their token at the same time the sale was finalized. Further, it was reported that the BK Consortium would purchase Bithumb in installments. What raised suspicions was the fact that the target sale date and the settlement of the last batch of payments were quite close.
This was refuted by Kim Byung-geon, the chairman of BK Consortium, who assured everyone that the full amount had already been secured from investors. Many had countered this assertion with a question, asking about the need for payment in installments if that was the case.
Many have raised similar concerns about the intentions of the owners even though Bithumb itself has been performing rather well when compared to other local exchanges. They have outshone its competitors in critical areas such as server security and user protection.
UPbit Higher Echelons Under Investigation
Korea's second largest exchange, UPbit is also in hot waters, with its operations from 2017 being officially reviewed. There are serious allegations against former executives that they had created fake wallets and deliberately inflated volumes to present an altered balance sheet of the company. In total, the company is accused of faking orders to the tune of an astounding $200 billion. While the investigation is still ongoing, an UPbit shareholder, as well as two executives, have already been arrested by The Supreme Prosecutors’ Office of the Republic of Korea.
UPbit has acknowledged the investigation but says this is all a misunderstanding. An official announcement read,
“The company did not trade crypto-currencies which it didn’t own, or have its staff and employees benefit from such trading. Upbit will fully cooperate with the authorities during its trial where the difference of viewpoints between the Prosecutors’ Office and Upbit regarding the methods of the transaction will be explained.”
The Wheels Just Keep On Turning
Apart from these ones smaller issues have been seen with Coinzest and Komid, both drew the ire of the community. For Coinzest it was a systemic error which led to the incorrect valuation of cryptos being air-dropped. Komid had a more sinister edge as the top bosses including their CEO was jailed for faking volumes.
The Path To Recovery.
When the markets surged during the bull run of 2017, many took all their savings and put all their eggs in one proverbial basket. This has scarred investors both psychologically and financially, causing most to exit this asset class as a whole. Scandals and security concerns have further complicated the recovery process.
To regain lost grounds, leading cryptocurrency exchanges such as UPbit, Bithumb and Coinone have joined hands to strengthen against money laundering. This is after the exchanges have increased vigilance against initial coin offering ext scams.
Any attempts by authorities to root out suspicious behavior should be welcomed with optimism. The hope is these investigations will help the industry in the long run.