Upbit can’t shake fraud charges in appellate courts

Last week, the state’s appeal on the not-guilty ruling from inferior courts towards Upbit’s fraud accusation took place. In the previous case, Upbit was accused of using fake accounts to make fraudulent transactions which raked in roughly $135 million for managers of the exchange and parent company, Dunamu. Kakao, one of South Korea’s largest tech startups, owns more than 30% of Dunamu.

The defense for Dunamu’s Chairman Chihyung Song, Financial Director Nam, and Team Leader Kim meant to demonstrate the great differences between Upbit’s case and the Komid, Korea Blockchain Exchange, and Coinnest cases. Of those cases, so far only the one involving Komid executives has drawn jail sentences and fines. They asserted that since Upbit used cryptocurrency that they in reality owned makes their case much different from the other three.

The defense refuted the prosecutors’ contention that the three cases were the same. They urged the court to see the major difference between trading coins that didn’t exist, like the other three exchanges had done, and trading real coins through fake accounts. Throughout the day, the defense remained adamant that since Upbit owned the coins that they traded on fake accounts, they should receive acquittals of all fraud charges.

Prosecutors for the state asserted that the purpose of all four cases was then and remains now the same: to deceive investors by artificially inflating transaction numbers through fake accounts.

Fake transactions – more money

Upbit’s defense emphasized the fact that Korea Blockchain Exchange, Komid, and Coinnest were all truly fraudulent because they showed transaction volume for crypto assets they did not actually own. Upbit, however, used their own crypto assets to make fake transactions.

In December 2018, Upbit admitted that they used bots to keep transaction volume high in order to protect users from price crashes. Their ill-advised statement now has them battling further litigation from the Korean government-backed prosecutors eager to take down the crypto exchange.

Furthermore, the defense insisted that “[since the facts are completely different,]” between Upbit’s case and the others, “[the ruling must be different.]”

The prosecution, on the other hand, pointed out that the essence of the case does not rest on whether Upbit truly owned the coins they traded. They said, instead, that the essence of the case remained the fact that users were deceived by false transaction volume, regardless of where the coins came from.

Returning to the same problems

This is far from the first time Upbit and its operators have found themselves in hot water since their inception in 2017. The fraud charges first came in 2018, after the Bitcoin Bubble burst. Then, prosecutors alleged that the company was transferring funds from customer accounts to a separate account. The separate accounts were suspected of belonging to an executive at Upbit.

That case was followed by the late-2018 case wherein over a billion dollars in fraudulent charges were alleged.

November, 2019, saw Upbit become the victim of a sizeable hack during what appeared to be a regular maintenance shift of coins. Then over $50 million worth of ETH was taken off the platform. Upsala Security confirmed that the coins taken during that hack were used for money laundering. Many in the local community strongly suspect that Upbit performed the hack from the inside. They also suspect exchange operators of perpetrating money laundering, as well.