Upbit Exchange Denies Wash Trading Volume Inflation Accusations by South Korea’s FSC
An ongoing concern in this bear market has been the fear that the markets would be manipulated and investors duped. Such fears were given more oxygen yesterday, 22nd December, when South Korea’s Financial Services Commission [FSC] accused top crypto-currency exchange , Upbit, of giving false data on the company’s trading volume.
Upbit might have inflated trading volume
According to a news report, three executives at Upbit had allegedly been working to manipulate the companies data by falsifying the actual trading volumes It is believed to have been carried out sometime between October and December last year.
What is more concerning is the amount claimed, fraudulent transactions amounting to a staggering 254 trillion won ($226 billion).
The tip of the ice-burg
The FSC claims that is not all, it has suspicions that exchange might have been using a bot system in order to bolster the prices of non-performing virtual currencies. There are also concerns that some 25,000 customers were illegally sold around 11,000 BTC, to the tune of nearly 110 billion won (approx $125 million).
An FSC official confirmed the charges and noted the regulatory body's apprehension about the impact of this news. He said,
”I’m worried about investors who may lose money in this market because of exchanges like Upbit. We need a way to make the market and the industry fair and transparent.”
The matter has now been referred to the Prosecutor’s office in the southern district of Seoul.
At the time of print top officials including the chairman of the board of directors have been charged, however they have not been detained.
Upbit denies allegations
Reacting strongly, the Korean crypto-currency exchange vehemently denied any wrongdoings. In a long and descriptive post on its website, the company took to explaining its position. It refuted all allegation of fraud and backed it up with a clear explanation of the company’s transactional history .
It stated in no uncertain terms that no wash trading or fraudulent transactions ever took place.
The explanation provided by Upbit seems to indicate a case of misidentification. It says that post launch, from 24th of September to the 11th of December, in order to stabilise its trading market it did conduct internal transactions in order to shore up the liquidity of its corporate account. This could well be the transactions under suspicion.
The exchange also made it clear that the investigation had nothing to do with its daily functioning and that the business was open as per usual.
Not the first exchange attempting to manipulate markets
Tricking investors by presenting a falsified account is not a new occurrence. Digital exchanges have taken the trick of volume inflation from other asset management markets. Earlier in the year, it was found that crypto exchange Kraken had used Tether (USDT) in order to manipulate the market. Another investigation claimed that Bithumb might have also practised trading impropriety, an allegation staunchly denied by the company.
In all this the biggest worry is a report from the Blockchain Transparency Institute (BTI). The recently released documents on trade data manipulation, claims that of the top 25 exchanges currently plying their trade only 2, Binance and Bitfinex, had no evidence of altered data.
At a moment when the industry is struggling with price stability this news is indeed grim. However it also shows how seriously regulators in the Asian markets are treating this segment. As the US SEC chair, Jay Clayton had pointed out it is better this happens now, so that the “bad apples” are thrown out and the industry is able to regain its credibility.