Police have raided Upbit, South Korea’s largest cryptocurrency exchange over alleged illegal transfer of customers funds.
Local media reports indicate that the Korean Financial Intelligence unit and the Financial Services Commission have taken control of Upbit’s office headquarters as they conduct an investigation into suspicious movement of the funds. Funds are thought to have been moved to personal accounts belonging to executives.
Chosun, a mainstream media outlet says the investigators are also looking at a possible case of fraud.
We have secured hard disks and accounting books through confiscation. Analysis is expected to take days, the prosecutor’s office said in a statement. The final report will be ready in a week’s time, the prosecutor’s office said.
Upbit has issued a statement confirming the investigation.
“UPbit is currently under investigation by the prosecution, and we are working diligently. UPbit services such as all transactions and withdrawals are operating normally. Your assets are kept securely in your account, so you can rest assured that you can use Upbit services.”
Dire consequences await if Upbit is found culpable including a possible shut down.
The markets have tanked today with some cryptocurrencies losing as much as 20% of their value. It is not, however, clear the extent to which the dip is linked to the raid.
Normal Operations Continue
Normal operations continue and users can still deposit and withdraw their funds according to the company.
The case echoes a similar one involving Coinnest. A top executive at the company was recently arrested for transferring tokens to his personal account.
Regulators now require exchanges to keep their assets separate from customer funds to prevent abuse.
Like its neighbour Japan, South Korea strictly supervises exchanges for compliance. South Korea is one of the most vibrant hubs for cryptocurrency trading.
Bitcoin and other cryptocurrencies still trade at a premium.
Authorities have been working to check wild speculation and prevent money laundering. Foreigners are locked out from investing in cryptocurrencies and initial coin offerings are banned.
Executives at the company have been replaced in the wake of the situation, the board has said.
Upbit is one of the largest exchanges with a market capitalisation of $2.1 billion according to CoinMarketCap.