Komid Crypto Exchange Managers Sent to Prison for Generating Fake Volumes

Two executives from South Korea-based digital currency exchange Komid have reportedly been sentenced to serve time in jail as they have been charged with “fraud, embezzlement, and misconduct”, according to local news outlets.

Found Guilty Of Manipulating Trading Volumes For Personal Gains

Choi, who is the CEO of Komid, was sentenced to 3 years in prison on January 17th. Meanwhile, the other executive, Park has been given a 2 year prison sentence after both men were found guilty of “orchestrating fraudulent trading volume reports on their platform.” Prosecutors claim that both Choi and Park were involved in a scheme in which they “fabricated” 5 million transactions on Komid, a crypto trading platform that both the executives manage.

The prosecutors alleged that the fake volumes were used to deceive traders into thinking the exchange was handling a large number of orders. As mentioned in court documents, the two executives earned around $45 million, mainly from exaggerating trading volumes on their digital currency exchange.

Committing Fraud Against "Countless Number Of Victims"

Commenting on the exploitative activities, the presiding Judge stated:

Choi has committed fraud for a countless number of victims for a long period of time…. Furthermore, he holds the financial authorities responsible for failing to keep track of the industry better.

Admitting to have engaged in fraudulent activities, Park revealed during the court hearing:

Choi entered false orders, then we repeated the process and fooled investors into thinking the transactions were authentic, organic trades.

Notably, an executive from another major Korean crypto exchange, UpBit was also indicted last month for entering false orders in order to artificially inflate trading volumes. Other staff members from UpBit were charged with allegedly creating fake membership accounts and then making deposits, in an attempt to deceive users.

Exploitative Bithumb Trader Generated $250 Million In Fake Volume

As CryptoGlobe reported in September 2018, Bithumb, one of South Korea’s largest crypto exchanges (in terms of trading volume), was being exploited by a user as they had regularly been generating $250 million in “fake volume” on the platform. Alex Krüger, an economist and market analyst, had pointed out that the millions in fake volume were being traded at Bithumb “every day at 11 AM Korean Time since August 25th” 2018.

The Argentinian digital currency trader explained that one particular user had been taking advantage of Bithumb’s promotional offer. The Korean exchange had been giving users up to 120% payback on all trading fees paid by users through airdrops on a “first come first served basis.”

The exploitative user had reportedly been trading with himself, in order to receive much larger paybacks. This process was described as being similar to “wash trading” as the user had continuously entered “two opposite limit orders.” The abusive activity reportedly allowed the trader to earn $150,000 per day, according to Krüger’s calculations.

Weekly Newsletter

Israeli Hacker Indicted For $1.75 Million Cryptocurrency Theft

A hacker from Tel Aviv named Eliyahu Gigi was recently indicted for his alleged role in stealing roughly NIS 6.1 million (or $1.75 million) in cryptocurrencies from people in numerous different countries, including Germany, Belgium and the Netherlands.

According the indictment filed this week, Gigi operated numerous scam websites that infected computers with malware that would steal cryptocurrencies that were stored on the devices.

The hacker stole nearly $2 million worth of bitcoin, ethereum, and dash, before they were arrested in June of this year. Gigi carefully covered his tracks by attempting to use remote servers and doing his best to conceal the cryptocurrencies and the wallet addresses that they were stored in.

He then transferred the currencies between different wallets, split them into different cryptocurrencies and used other tactics to obfuscate the ownership of the funds.

During the investigation, it was initially suspected that Gigi was guilty of stealing $100 million, however, once the investigation was concluded, that number was significantly scaled down to less than $2 million.

According to the Israeli publication Globes the investigation was conducted by the Israeli Police's cyber unit, and led to the arrest of Gigi and his younger brother, a 22-year-old demobilized soldier. The news outlet adds:

At the outset of the investigation, suspicions were raised that the two brothers had stolen $100 million from digital accounts kept in bitcoin through an international fishing fraud. The indictment eventually filed was against only the older brother, and the initial suspicions that $100 million had been stolen were scaled down to NIS 6 million. [$1.75 million]

Police were initially tipped off to the crime after receiving reports the hacker was sending messages to users on cryptocurrency forums, directing them to a website that claimed to offer wallet management software.

Some of the users who received the message thought that the website looked suspicious. Worried about their security, they reported the websites and Gigi's forum accounts to police.