Mr. Choi Hyunsuk and Mr. Park, two leaders of the cryptocurrency exchange Komid, were sentenced to serve time in jail, The News Asia reports.
The CEO of Komid, Mr. Choi, received a three-year sentence while Mr. Park was sentenced to two years in prison, as the judge found them guilty of fraud, embezzlement, and misconduct.
Allegedly, they gained around $45 million from conducting a fraudulent operation.
The South Korea-based exchange is accused of orchestrating and manipulating trading volume reports in order to increase the visibility of their company.
According to the court’s verdict, the manipulation scheme was organized by two defendants in order to increase the trading volume on their platform by fabricating 5 million transactions. In order to do so, the verdict notes, two defendants used automatic trading strategies to create a high number and volume of transactions.
“Choi has committed fraud for a countless number of victims for a long period of time,” the verdict notes, according to The News Asia.
This court decision marks the first time that representatives of a cryptocurrency exchange are sentenced to jail for inflating trading volume.
“Choi entered false orders, then we repeated the process and fooled investors into thinking the transactions were authentic, organic trades,” admitted Mr. Park.
Accordingly, the sentences were reduced as defendants returned a portion of the misused funds. In addition, the judge notes there were no “strong fraudulent intentions” from defendants to commit this crime.
Still, the jail sentence was needed due to the amount of money involved and for the negative effect that this case has on the entire domestic virtual currency market, according to the judge.
This news came only a month after it was announced that senior officials of Upbit, one of the biggest Korean crypto exchanges, have been indicted for fraud. Suspects are accused of allegedly selling around 11,500 bitcoins to around 26,000 investors. Upbit has denied the allegations.
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