The Kakao backed crypto exchange, UPbit, a relatively newcomer to the scene which has quickly shot up to handle $2 billion in trading volumes, has been raided by authorities earlier today.
“Upbit is currently under investigation by prosecutors and is cooperating,” the exchange said in a notice to clients.
While Seoul’s Southern District Prosecutors’ Office said they searched UPbit’s headquarters in the Gangnam District this Thursday and Friday, providing no further detail.
Reports are suggesting the exchange is suspected of transferring funds from the accounts of its customers to accounts suspected to belong to an UPbit executive.
Reports further suggest authorities seized accounting records and computer hard disks belonging to the exchange.
With this raid part of multiple investigations authorities have been carrying out since March 2018. Starting with an investigation of Coinnest, a somewhat small crypto exchange. Its chairman, Kim Ik-hwan, was detained for charges of fraud and embezzlement in April.
Reuters says in total “four executives from two other South Korean cryptocurrency exchanges were detained in April in connection with the alleged embezzlement of billions of won.”
UPbit has stated trading and withdrawals are unaffected by the investigation and all funds are safe. Coinnest too appears to still be operating.
This may, therefore, be an isolated investigation of bad apples following South Korea’s regulation of exchanges earlier this year.
In contrast to other regulatory approaches, South Korea required verification of traders through bank branches or bank accounts.
That stricter set-up may have allowed them to see where the money is going, with any embezzlement thus seemingly quickly identifiable.
Yet that UPbit is under investigation does come as a surprise because they’re backed by one of the country’s biggest established company and chat-app, Kakao.
Something which has allowed the relatively new crypto exchange to quickly gain trust, but whether they will be able to retain it remains to be seen.