South Korea's top cryptocurrency exchange, Upbit, is facing a major legal blow. On Friday, the Southern Seoul District Prosecutors' Office indicted three senior officials — a board chairman, a financial director, and a working-level manager — for fraud and swindling investors. Upbit dominates the local market with over 50% share and ranks third globally by adjusted 24-hour trading volume (approx. $1.1 billion at the time).
Allegations: Phantom Orders and Bitcoin Dumping
According to Yonhap News, the prosecutors claim that the officials opened a fake account around September 2017 and placed bogus orders worth 254 trillion won ($226.2 billion) over roughly two months to inflate trading activity. Simultaneously, they sold 11,550 bitcoins to about 26,000 customers, generating 150 billion won (approximately $134 million) in illicit profits.
Upbit’s Defense: Premise Launch Phase and Clean Audits
Upbit issued a detailed statement denying all allegations. The exchange, backed by Kakao, stressed that the questioned transactions occurred during a three-month period (September 24 to December 31, 2017) coinciding with the launch of its platform on October 24. “All transactions after that period are unrelated,” the statement said. Upbit explicitly stated: “We did not engage in wash trading, fake orders, liquidity provision (as claimed), or trade crypto we didn’t own.” While admitting to some cross trades for marketing purposes in the first two months, Upbit argued these represented only 3% of total volume and had no market impact. The exchange also cited three independent audits (Jan, June, Oct 2018) confirming that its combined crypto and cash reserves exceeded customer liabilities — 103% for crypto and 165% for cash as of October 8, 2018. The case remains under court review.