September 19, 2018

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CEO of Korean Exchange Coinnest among Four Arrested for Fraud




CEO of Korean Exchange Coinnest among Four Arrested for Fraud

South Korean police have arrested four high-ranking representatives of two cryptocurrency exchanges, including Coinnest’s CEO. They were detained on arrest warrants issued after a fraud investigation, prosecutors said. The executives are accused of embezzling funds belonging to customers and may face additional charges.

Also read: Three South Korean Crypto Exchanges Raided for Diverting Funds

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Suspects Transferred Billions of Won to Their Accounts

CEO of Korean Exchange Coinnest among Four Arrested for FraudPolice officials and prosecutors in Seoul announced they have detained four executives of two South Korean cryptocurrency exchanges. Kim Ik-hwan, co-founder and CEO of Coinnest, and the other three suspects were taken in custody on Wednesday. A local court has issued warrants for detention for up to 48 hours, the Seoul Southern District Prosecutors’ Office confirmed.

The detainees have been accused of transferring funds worth billions of Korean won from clients’ accounts to their own, Yonhap agency reported. According to other Korean news outlets, further charges may be brought against them, including for violations of the country’s commercial law.

Kim Ik-hwan’s detention is the first arrest of an acting head of a South Korean cryptocurrency exchange. According to prosecutors quoted by Hanguk Ilbo, another CEO and two senior employees are among the suspects charged with embezzlement, fraud and failure to carry out mediation of crypto transactions.

Three Exchanges Appeared on the Radar in January

Last month South Korean prosecutors raided the offices of three cryptocurrency exchanges suspected of buying bitcoin with funds belonging to their customers, as news.Bitcoin.com reported. The searches were conducted after an investigation into suspicious money transfers.

Authorities seized accounting documentation, transfer receipts, hard disks and mobile devices from the trading platforms. Law enforcement officials believe diverted funds were used to purchase cryptocurrencies on other exchanges. According to later reports, the companies investigated by the Korean Financial Supervisory Service are located in Seoul’ Yoido district.

A prosecutor said that the three exchanges “turned up on the radar in January”. The dubious transfers were detected during a joint audit conducted by the Financial Services Commission and the Financial Intelligence Unit.

CEO of Korean Exchange Coinnest among Four Arrested for Fraud

Coinnest ranks among the leading crypto trading platforms in South Korean, with Bithumb and Upbit topping the charts. The exchange is less known outside the Asian country. According to Coinmarketcap, Coinnest’s most traded asset is Tron, with more than 52% of the daily volume (over $6 million USD). Bitcoin is second with less than 20% (>$2.2 million).

South Korea is home to some of the largest cryptocurrency exchanges in the world. Trying to improve oversight, Seoul authorities implemented a mechanism to end anonymous trading through real name identity verification. Earlier this year, Korean financial regulators conducted inspections in leading commercial banks, targeting the “virtual accounts” used by crypto exchanges to manage their clients’ money.

Do you expect other arrests after the detention of Coinnest’s CEO? Share your thoughts on the case in the comments section below.  


Images courtesy of Shutterstock, Infox.


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