Two top executives from the South Korean cryptocurrency exchange Komid will be serving jail time for faking artificially high trade volumes, according to reports.
On January 17th, Komid CEO Hyunsuk Choi and in-house director Mo Park were sentenced to jail terms for their roles in “orchestrating fraudulent trading volume” on the exchange.
Prosecutors assigned to the proceedings described how Choi and Park faked 5 million transactions on the exchange, artificially inflating trade volumes to deceive investors and attract new users to the platform. It is estimated that the scheme netted the pair close to 50 billion won ($44.3 million).
The judge ruling on the case commented:
Choi has committed fraud for a countless number of victims for a long period of time… Futhermore, he holds the financial authorities responsible for failing to keep track of the industry better.
No Honor Among Thieves
While Choi and Park acted together to facilitate their scheme, the alliance appeared to falter in the face of criminal charges.
The News Asia notes that Park was especially forthcoming to prosecutors about Choi’s role, stating:
Choi entered false orders, then we repeated the process and fooled investors into thinking the transactions were authentic, organic trades.
For his part in the scheme, Park was sentenced to two years imprisonment for “fraud, embezzlement, and misconduct” while Choi was sentenced to three years.
According to news outlet Edaily, the judge’s sentence was mitigated by the fact that some of the ill-gotten gains had been returned and that, in his opinion, Choi and Park “did not appear to have committed a crime with strong fraudulent intentions.”
Despite these factors, however, the judge concluded that Choi and Park’s actions had damaged customers’ confidence in the exchange as well as having a negative impact on the cryptocurrency market as a whole.
Dishonesty Not the Best Policy
This is not the first time a South Korean exchange has come under fire amid allegations of fraud, although this appears to be the first time that convictions and jail sentences have been handed down.
In December of last year, three employees of the country’s largest cryptocurrency exchange, Upbit, were indicted on charges of allegedly falsifying more than 254 trillion won ($225.6 billion) worth of fake orders to artificially inflate the exchange’s trade volumes. The scheme was reported to have resulted in earnings of more than 122 billion won ($108.3 million).
Upbit has denied the allegations and the employees – including two executives – were not detained, though the investigation is ongoing.
Do you think that we will see more crypto exchanges being held accountable for the accuracy (or inaccuracy) of their reporting? Sound off in the comments below.
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