Upbit's first trial not guilty

The operator of Korea’s largest cryptocurrency exchange has been found not guilty of economic crimes including forging electronic records. Song Chi-hyung, chairman of bitcoin operator Dunamu, and two other associated people were cleared of the charges in Seoul Southern District Court on Jan. 31. Dunamu is the operator of Korea’s largest cryptocurrency exchange Upbit. During a December hearing, prosecutors had asked the court to sentence Song to seven years in jail and a fine of 1 billion won ($836,548) jail time. The court, however, noted that Song had used a random account to manipulate the cryptocurrency trade volume and lure in individual investors, and the prosecution did not provide enough additional evidence to support a conviction. The court questioned whether or not Dunamu had falsely charged cryptocurrency on a random account called "8" and manipulated investors. The prosecutor claimed that Song had manipulated Upbit’s data processing system to make account 8 appear to have cryptocurrency assets worth 122.1 billion won. In the process, the prosecutor said, Song sold 15,000 digital tokens and obtained a 149.1 billion won profit along the way. “Prosecutors said that Dunamu has no record of charging bitcoin that corresponds to what the account 8 had under its account, [meaning he had manipulated the system]” said the court. “However, it is hard to conclude that Dunamu manipulated the system just because it doesn’t have a corresponding record. [The prosecutors’ case] should be more based on facts.” Prosecutors also had said that Dunamu obtained some 149.1 billion won from selling bitcoin illegally. “There aren't any victims at Upbit that actually lost their money due to Dunamu’s falsely obtained benefits,” the court said. “Upbit clients care about whether what’s written on their order receipt is right or wrong. Even though Dunamu didn’t clearly state that they themselves were a participant in the trade, Dunamu had announced to early clients of Upbit that they would buy or sell bitcoins in order to ensure liquidity. It is hard to be convinced that Dunamu had been doing that in a sneaky manner, as the prosecutors are claiming.” Prosecutors had also claimed that by manipulating the system to make trade volume appear higher, Dunamu had lured in innocent investors. “The prosecutors also did not prove that Dunamu falsely increased the amount of bitcoin trade through account 8 in order to lure in individual investors," the court said. "Usually, bitcoin operators exaggerate trade volume to show individual customers that bitcoin trade is easily accessible. However, Dunamu wasn’t even registered in CoinMarketCap, a bitcoin-related data provider, until December 2017. … For that reason, it is hard to see that false sales of bitcoin could have had a potential influence in luring in clients." The court therefore decline to convict Song on charges of cross trading or false trading. The court also cast doubt on the prosecutors’ claim that account 8 went for short-term profit taking by buying and re-selling the bitcoins. In order for the prosecution’s claim to be correct, the account’s order process — buying and reselling — would have had to be done within a few seconds. The account's record shows that the orders were completed with more than 10 seconds elapsing between buying and selling. “In the case of cryptocurrency trade, there is no specific set of regulations related to the provision of liquidity,” the court said. “Therefore, we cannot apply the regulations that are applicable to stock markets to the cryptocurrency market. If there is no specific set of regulations.”

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