South Korean cryptocurrency exchange Komid appears to have hit rock bottom after its top executives were sentenced to jail for conducting fraudulent activities on the platform. This week, local news source Blockinpress reported that Komid’s chief executive and executive director, Choi Mo and Park Mo, were sentenced to prison by a Supreme Court branch in Seoul.
Misrepresenting the Exchange
The report explained that Choi and Park had been accused of fabricating trading volume data on their platform. The two had planned to boost the company’s reputation as a top crypto exchange in the country, but they ended up being caught up in the scheme.
The two had facilitated fiat-to-crypto and crypto-to-crypto trades on their platform. However, they also created fake token listings on the site and filled it with phony information. Soon after Komid launched, the platform logged up to $5 million in daily trading volumes. Such growth soon raised suspicions. While Komid had the appearance of a legitimate exchange, the court alleged that the two businessmen used a software bot to generate large, meaningless trading activity.
The fake businessmen reportedly got about 30 billion won ($25 million) out of their scheme.
Ahn Seong-joon, the judge overseeing the case noted:
“Mr. Choi and others have repeatedly committed fraud for a considerable period of time targeting a large number of unspecified victims. Mr. Choi and others used the point balance that was falsely entered for the actual cryptocurrency transaction.”
Trials for both men have been ongoing for a while. During the first and second trials, the court considered that Park and Choi returned part of the finds to their clients. Thus, it reduced its sentence for them. Park and Choi received two-year and three-year sentences, respectively.
As for Komid, it’s unclear whether the exchange had any other employees or executives who could take over. However, the taint to its reputation means that the exchange is pretty much dead.
Coinbit Bites the Dust Over Wash Trading
Komid’s fake trading news is just the second coming out of South Korea this week. On Wednesday, Seoul Shinmum reported that Coinbit — the third-largest crypto exchange in the country — had been embroiled in a wash trading scandal of its own.
According to the news source, Coinbit’s owner — coincidentally, Choi Mo — and his management team were accused of inflating transaction volumes using different ghost accounts.
The news medium explained that it was first alerted to the activity by a company insider in May. Following an investigation, it found that 99 percent of transactions on Exchange 1 — Coinbit’s platform for major cryptocurrencies — between August 2019 and May 2020 were fake. Coinbit also blocked coin transactions with other exchanges on Exchange 2 — its platform for smaller cryptocurrencies.
These actions enabled the management team to control the supply of coins and directly realize market margins by trading large coin quantities at certain times.
The Seoul Metropolitan Police eventually shut the exchange down and confiscated several company properties at its Seoul-based headquarters. They estimate that the fraudulent activities netted the exchange and its management over 100 billion won ($84.26 million) in total.