Upbit raided over fraud allegations

Korean prosecutors raided the office of Upbit, the country’s top cryptocurrency exchange, over fraud allegations on Thursday and Friday.

The Seoul Southern District Prosecutors’ Office raided the office of Upbit in Gangnam District, southern Seoul, and confiscated computer hard drives and account books.

The company allegedly allowed the trading of cryptocurrencies it didn’t own by rigging its system to indicate that the coins were in its possession. Upbit is suspected of “paper trading,” as the number of cryptocurrency wallets it has access to is considerably smaller than the amount of cryptocurrency traded on its platform.

Lee Suk-woo, the former chief of Kakao who took the helm of Dunamu, the operator of Upbit, last December, is also being investigated by prosecutors over alleged fraud.

“The company will cooperate faithfully in prosecutors’ investigation,” said Upbit in a statement released Friday. “All the services of Upbit are operating normally and the traders’ assets are securely stored in your account, so we ask our customers to be at ease using our service.”

Dunamu is a local fintech company which gained prominence for its KakaoTalk-based mobile stock trading app Kakao Stock. The company partnered with Bittrex, one of the world’s largest cryptocurrency exchanges, to launch Upbit last year.

The prosecution’s investigation into Upbit comes about a month after the arrest of Kim Ik-hwan, the CEO of Coinnest, another major Korean exchange. Kim faces charges that he and other company executives siphoned money from accounts into their own.

BY CHOI HYUNG-JO [choi.hyungjo@joongang.co.kr]