South Korean cryptocurrency exchange Upbit was reportedly raided by local police and ten prosecutors on suspicion of fraud. Due to some anti-money laundering compliance concerns, a number of crypto exchanges' corporate accounts in Korean banks have been investigated by the Korean Financial Intelligence Unit and the Financial Services Commission. According to the report, Upbit allegedly listed cryptocurrencies that it did not have in its balance sheets. "We have secured hard disks and accounting books through confiscation. The analysis is expected to take days", and that the final report on the UPbit case will be released next week.
This latest suspected fraud comes at a time of increased scrutiny in South Korea and Asia in general.
Prosecutors have alleged that Upbit, which commenced operations only in September 2017 and quickly upended the dominance of local rival Bithump, was allowing customers to trade in cryptocurrencies it did not actually hold.
Users holding funds on the exchange then withdraw en masse, as shown by data uploaded to social media, causing volatility across Bitcoin markets and prices to sink below $9000.
In a statement posted on its homepage, Upbit confirmed it was being investigated by prosecutors and was cooperating with authorities. It said that services such as transactions and withdrawals had not been affected and client assets were safe. "Your assets are kept secureñy in your account, so you can rest assured that you can use Upbit services". The investigation is part of an ongoing regulatory tightening on exchanges in South Korea.
The exchange is the fourth largest cryptocurrency exchange by trading volume, according to CoinMarketCap's rankings of markets with fees. In March prosecutors had raided the offices of three cryptocurrency exchanges that they thought were siphoning off funds from customers' accounts. Their first target was Coinnest where the chairman, Kim Ik-hwan, was over embezzlement and fraud charges. After the bankruptcy of the now-defunct cryptocurrency exchange Mt. Gox, the Japanese financial authorities ordered the Mt. Gox trustee to sell over 200,000 bitcoins and convert it to Japanese yen.