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South Korean accounting firm Yoojin announced recently that an accounting audit of the crypto exchange UPbit did not reveal any wrongdoing.
Prior to the investigation, rumors swirling around the exchange claimed that the company was inflating its numbers and didn’t actually have an adequate volume of crypto stored in multi-signature wallets. Snapshots created by the exchange from earlier this year confirm that their holdings do indeed match the financial information detailed on official company statements.
Still, the Korea Financial Intelligence Unit and Financial Supervisory Service continue to look deeper into the matter.
UPbit currently operates 90 different wallets corresponding with 90 different currencies for trading on its website. Yet the crux of the investigation centered around the fact that the exchange platform offers 120 different currencies for trading. In short, every currency being traded should have its own wallet.
For now, it appears UPbit will continue doing business as usual. That hadn’t changed even in the midst of the government’s raid, where a note clearly displayed on the company’s website informed investors that they would still be able to make trades and withdraw funds.
UPbit currently allows users to trade the Korean Won, U.S. dollar, Tether, Bitcoin and Ethereum against the price of other cryptos. The website is one of the key cogs in the movement of value across the cryptocurrency industry. In fact, founder Song-Chi-Hyung now appears on Forbes’ Richest People In Crypto list with an estimated net worth of between $350 million and $500 million.
Runaway Crypto Trains
The idea of cryptocurrency exchanges and other crypto-based businesses running away with people’s money is nothing new. That’s why many pundits in the industry routinely point to the ups and downs of the market and the regulatory framework as indicative of the days of the Wild West.
This thinking began back with the infamous case of Mt. Gox. The exchange first launched in 2009 and quickly became the largest bitcoin trading website in the world. Fast-forward to 2014. The owners of the company filed for bankruptcy as millions of dollars worth of bitcoin go missing thanks to hackers.
Even today, while most seasoned veterans in the crypto space try to put the past behind them, it’s hard to ignore the fallout. Recently, Greek police derailed an attempt to assassinate Mt. Gox hacker Alexander Vinnik. At the very same time, thousands of seized bitcoins stemming from Mt. Gox’s downfall have been sold by a bankruptcy trustee, deflating the value of the currency.
While Mt. Gox’s downfall is probably the most infamous example of a runaway crypto train bilking people out of their life savings, there are many other examples.
Bitconnect promised investors high yield returns in the form of daily compound interest in the most notorious pyramid scheme the cryptocurrency industry has ever seen. At its all-time high, the price of one Bitconnect token reached over $435 USD, which put the company’s market capitalization at an astounding $2.68 billion. Less than two weeks after reaching that peak, the price of one token plummeted to less than $30 once investors realized the company’s business practices were illegal and they were about to be shut down by the SEC.
USI-Tech, a direct competitor of Bitconnect, also received a cease and desist notice from the Texas State Securities Board in December of last year.
In June 2017, crypto exchange YoBit was alerted that their offering of the token OmiseGO was not set up properly and therefore was not providing traders with actual OMG tokens. Who alerted Yobit of this problem? The official OmiseGO Twitter account.
Maturing Is A Process
No matter what happens with the ongoing UPbit investigation and what the outcomes may be, the truth is that the Cryptocurrency industry just isn’t where it needs to be in terms of maturity. Regulators will continue to swarm in on businesses in various facets of the market until frameworks are structured to filter out these instances. While there is no bulletproof framework in any industry for protecting consumers against fraud, maturation is a process, and as far as Cryptocurrency is concerned it’s still early in the game.
Jack Choros is a freelance writer for Blockchain Business News Network