Group that extorted billions of won through crypto exchange arrested
[Rani’s investment] The Incheon Metropolitan Police Agency’s Intelligence Crime Investigation Team said on Aug. 16 that it has arrested a cryptocurrency exchange CEO surnamed Kim and five others for fraud. It added that it booked without detention 17 other individuals for helping the group and is currently searching for one other individual related to the case. According to the police, Kim operated three cryptocurrency exchanges until recently in Cheongna, Incheon and other locations since June of last year. The group is under suspicion for extorting around 177 billion won ($146 million) from 26,300 customers of the exchanges it operated through transactions of 28 tokens that it developed. Kim also faces charges of extorting 58.5 billion won worth of funds from 1,960 individuals. Since April 2017, Kim promised 120 to 150 percent returns on investment in initial coin offerings (ICO) in areas such as Incheon and Gwangju. Confusion surrounding the CEO of the cryptocurrency exchange in question Cryptocurrency investors that are well aware of the market will likely be confused about the recent report as the CEO of the cryptocurrency exchange is an individual surnamed Min. In public, Min was the CEO since the exchange was first founded, but stepped down last December. Min returned as CEO in March this year. From December to March, the exchange was run by an individual surnamed Shin. According to the police, however, Kim was the cryptocurrency exchange’s CEO from September 2017 until March 2018. Min was appointed as the exchange’s CEO in April 2018. Kim also served as an internal director of a management company that serves as the operating company of the exchange until June 2018. Shin and Min have also served as CEO at the management company. “Most cryptocurrency exchanges have a front man as CEO while those who actually run the operation are hidden,” explained Park Ju-hyun, a lawyer who represents those who were extorted by the cryptocurrency exchange. Ultimately, Kim extorted his cryptocurrency exchange users, while those who worked with him also stole investor funds in a similar way. The cryptocurrency exchange in question was operated through so-called “beehive” accounts, in which money is managed in an intricate and not at all transparent way, much like a beehive. There is no way to stop a company from using the funds stored in a beehive account, making it highly susceptible to theft. There aren’t a lot of investors that use such exchanges considering the risks. Kim’s exchange used various methods such as payback events and expensive imported vehicles as prizes in order to accrue users. The payback events were operated by creating tokens that paid dividends. The tokens were also created by the exchange itself and traded solely on the exchange in question, allowing for price manipulation. One token that was created last November was worth 0.5 won per token, but rose to 20,000 to 40,000 won. The 4 million to 8 million percent rise led investors to buy due to the incredible price rise. However, the token dropped to 30 won in an instant. One investor wrote on a cryptocurrency forum that only 250,000 won remained after an investment of 70 million won. This type of prize events and price manipulation has also been used on other exchanges.