Two Former Executives Jailed for Faking Cryptocurrency Transaction Volumes

… wash trading on the crypto industry, saying, “the crime has damaged customers’ confidence in the virtual currency exchange and has had a negative …

On January 17, 2019, two former executives from Komid, a South Korean cryptocurrency exchange, were jailed for three and two years respectively for using fake accounts to fraudulently inflate transactions on the exchange.

The Sentencing

In a historic move, the 13th Criminal Settlement Agreement of the South District Court in Seoul has dished out the first ever jail term for the manipulation of a cryptocurrency exchange’s transaction numbers. The sentence in question was given to two executives at Komid, a Korean cryptocurrency exchange.

The two executives who have been sentenced are Hyunsuk Choi and another individual named Park. Hyunsuk Choi served as the CEO and an in-house director at Komid respectively.

Choi received a three-year sentence while Park received a two-year sentence for what the judge called “orchestrating fraudulent trading volume”.

The pair allegedly set up five accounts, fabricating 5 million transactions which amounted to around $45 million in fees. A bot was used to create large orders which inflated the exchange’s transaction volume when in fact the exchange never had that much in funds to begin with.

The Problem of Wash Trading

The act that the men engaged in is referred to as ‘wash trading’ and is the process by which transactions are faked in order to deceive investors and the public in order to make higher profits.

It has been speculated that the practice of ways trading is more common among small altcoins trying to attract more business. In the case of Komid, the money being made from the scheme is hardly a small amount.

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In recent times, a number of exchanges such as Bitforex and Binance have been accused of faking a percentage of their transaction volumes, though the exchanges have adamantly denied these allegations.

The reason behind these suspicions is that similar amounts of transactions of the same tokens seem to take place around the same time on these exchanges, leading some to believe that automated bots are carrying out these transactions to drive up figures.

A study by the Blockchain Transparency Institute even suggests that up to 80% of pairs on 95% of exchanges are faked.

The Effect of Wash Trading on the Industry

When reviewing the case, the judge who gave the sentencing commented on the effect of wash trading on the crypto industry, saying, “the crime has damaged customers’ confidence in the virtual currency exchange and has had a negative effect on the domestic virtual currency trading market.”

This statement has truth to it as cryptocurrency is just starting to gain the interest and trust of the public, and being associated with transaction manipulation is hardly a good look.

This sentencing, however, could set a precedent as well as send a strong message that wash trading will not be tolerated by law enforcement.

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Why These Innovators Left Facebook, Google And More For Crypto

Despite plummeting cryptocurrency prices since November, a number of former Silicon Valley tech employees are leaving roles in companies like …

Even under a massive price drop, some people are leaving Silicon Valley jobs for crypto.Getty

Despite plummeting cryptocurrency prices since November, a number of former Silicon Valley tech employees are leaving roles in companies like Google, Facebook, Microsoft and Airbnb to work in crypto. A recent Glassdoor study found crypto-related job growth to be outpacing crypto prices. I interviewed people in a variety of roles within the crypto space to hear why they made the leap and where they see crypto headed long-term.

Bitcoin has plummeted since November 2018.Forbescrypto.com

Yu Pan, R&D Engineer, Origin Protocol

Yu Pan, an engineer at Origin Protocol previously worked at both PayPal and YouTube.Origin Protocol

Tech Companies you left?PayPal, YouTube, Omlet Arcade

Why did you make the leap to crypto? I’ve always been interested in the magic of public key cryptography and believe that decentralized applications have the potential to change the world. Cryptography allows a person to expose only the information that she wants to share and provides a mechanism for verification without trust.

Where do you see crypto in the long-run? Publicly visible ledgers are necessary and powerful, especially with the ability to encode agreements and logic beyond just storing data. We want to create a future where buyers and sellers can transact in the wild by using neutral tools that don’t favor either party. A perfect use case for this is the sharing economy.

What do you like about your job now versus your former role? I like the open-source environment and mentality in addition to working with public key cryptography. Unlike working on centralized applications, people here care more about the collective effort to build community and distributed solutions. It’s not about holding on to ideas and intellectual property. Instead of thinking about how to keep a centralized database safe and secure, we have to think about the consequences for the entire network. Decentralization results in complete visibility of code and data, meaning we have less control once our code is out in the wild. If something needs to be fixed, we can’t just take it out, we have to involve everyone who has adopted our technology to add in the needed changes.

Henry Liu, Managing Partner, YGC Capital

Henry Liu, managing partner at YGC Capital, left a role at Facebook.Henry Liu

Tech Company you left: Facebook

Why did you make the leap to crypto? The blockchain industry has reached the critical mass of early adopters. I truly believe that after 2017 there won’t be a world without cryptocurrencies. I’ve missed the booms for dot-com, the mobile adoption, and the sharing economy, but I won’t miss this.

Where do you see crypto in the long-run? There are clear use-cases today in record keeping, auditing, supply-chain and number of industries that can use blockchain to bring efficiencies to the archaic systems and help them with long overdue digital transformation. I believe it will open up borders and reduce corruption in countries like Venezuela, Argentina and Turkey.

What do you like about your job now versus your former role? I’m a double-immigrant. My family is from China and I was born in Osaka, Japan. I’m a native Japanese, Chinese, and English speaker. There are very few roles that are out there that would allow me to use my cultural advantages and also my previous career experiences. I thought Facebook moves fast, but in comparison to blockchain, it’s like a car next to a bullet-train.

Will Bitcoin always be the standard? Bitcoin won’t go away, but we also don’t see it growing either. The community of bitcoin and the core team are not focusing on adoption and usage and without more people using it, there won’t be any growth in the value either. We believe the industry will specialize in different sectors and we are already seeing that unfold with micro-payments and IoT. We hope BTC does well, but our bets are elsewhere.

Kari Tarr, Director of Operations, Good Money

Kari Tarr previously worked at Airbnb and Amazon before joining a crypto startup.Kari Tarr

Tech Companies you left: Airbnb, Amazon

Why did you make the leap to crypto? It was risky at the time I joined both Airbnb and Amazon before that, but the timing turned out to be right. I’m making a similar bet on crypto because I think the next few years are when we’ll see 10-100X growth. This type of digitization of legacy industries happens in waves. I believe the geeks will find a way, and cryptocurrencies will become mainstream, it’s not if, but when.

What do you like about your job now versus your former role? I’ve never done a pre-product startup and the energy and sense of urgency is invigorating. There are similarities to the early days at Airbnb, building a product without knowing entirely what the regulatory landscape will look like when it’s finished.

What will using a crypto wallet look like in 3 years? Certainly, less friction. In 3 years, we’ll have settled on a solution for managing private keys in a way that’s secure and still somewhat decentralized, but protects users from making irreversible mistakes. It’ll feel as simple as Venmo but using more innovative authentication like biometric technology. The next big leap is really going to be all about identity management, which is the prerequisite for financial transactions.

Will Bitcoin always be the standard? No, Bitcoin proved the concept of managing a distributed financial ledger on the internet, but it has run into problems with technical governance, scalability, and power consumption relegating it to being a store of value, but unsuitable for global payments. There are far more advanced blockchains being developed, and it remains to be seen which one the market will pick as the platform of choice.

Akbar Thobhani, Co-Founder and CEO of SFOX

Akbar Thobhani worked at NASA and Airbnb before co-founding SFOX.Akbar Thobhani

Tech Companies you left: Airbnb, Stamps.com, NASA

Why did you make the leap to crypto? I have always been inspired by projects that find new ways to connect and empower people to transact across borders safely. Airbnb did this by providing a platform that allows people to securely share homes with strangers all over the world; crypto takes this a step further by allowing people to safely transact around the world without any kind of intermediary.

Will Bitcoin always be the “gold standard” for crypto? Bitcoin will probably always be the “gold standard” because it has the largest adoption of any cryptocurrency, the simplest use case and the most robust infrastructure of any cryptocurrency. It’s where individuals and institutions alike begin when they first adopt crypto. As crypto matures, it’s easy to imagine other cryptocurrencies will become “standards” of their own—for example, it’s easy to imagine one or several blockchains emerging as a platform for equity settlement.

How will crypto scale? This question implies that crypto has a scaling problem in the first place. It doesn’t. You might have heard comparisons between Visa’s thousands of transactions per second and Bitcoin’s 7 transactions per second, but that’s comparing apples to oranges. Blockchains like Bitcoin’s are best suited for acting as a settlement layer, and companies like Visa only actually settle with banks once or twice per day. In this regard, the scale that cryptocurrencies like Bitcoin need is already there: other technologies will serve as the scalable transaction layer on top of a blockchain-based settlement layer.

Mike Zajko, Head of Sales at CoinList

Mike Zajko, Head of Sales at CoinList previously worked for Facebook.Mike Zaiko

Tech Company you left: Facebook

Why did you make the leap to crypto?

It’s rare one has the opportunity to join an entirely new industry during its inception. Crypto presented this type of opportunity and I didn’t want to be on the periphery, I wanted to play a role in it.

Where do you see crypto in the long-run? Crypto as a term will fade into that background as the technologies being developed provide the infrastructure for the way we do business. We’ll move beyond it being used as a pure speculative asset to an era of real functional value.

What do you like about your job now versus your former role?

With crypto being so new, you have the opportunity to create entirely new ways of doing things. There is a real demand for creative experimentation without reliance on old maxims. Facebook at its core is an advertising business, while it’s incredibly disruptive in its own right, the company still operates within an industry where the rules have already been written.

These conversations have been edited and condensed for clarity.

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Coinbase Completes Acquisition Of Blockspring

Coinbase’s growth trajectory has gained one more pillar after it acquired one more crypto-related firm- the 10th such acquisition in the last 12 months.

Coinbase’s growth trajectory has gained one more pillar after it acquired one more crypto-related firm- the 10th such acquisition in the last 12 months.

Coinbase is one of the fastest growing crypto companies, recently valued at $8 billion and attracting financial backing from top investors in the U.S. and from around the world. Its latest acquisition is Blockspring, announced on January 17, 2019.

Writing in the blog, the startup’s CEO Paul Katsen said that they chose to join Coinbase for a number of reasons, calling this decision “a no-brainer.” He lauded Coinbase’s “commitment to establishing an open financial system and the strength of its engineering team.”

Blockspring initially launched its services as a serverless API platform, eventually morphing into a provider for tools that allow users to utilize its API data to aid in productivity. The startup is quite popular in the market, with users able to pull API data into Excel or Google Sheets.

Katsen added that the firm’s goal is to make “the technical simple and accessible“, and that the acquisition allows it to “push these goals forward” with the help of a talented team at Coinbase. This, he said, would see them achieve greater things, more than the Blockspring team would have on its own.

In 2015, Blockspring received backing from Y Combinator, with Andreessen Horowitz and SV Angel contributing to a $3.4 million funding round.

During the funding round, the startup garnered praise from Coinbase’s current CTO Balaji Srinivasan, who had lauded Blockspring for its service that easily connected “spreadsheets and other applications to web services without any coding experience.”

Tim Wagner recently commented about Blockspring and its Coinbase integration, noting that the move would help the exchange build its developer tools

According to the company’s blog post, the acquisition will see the startup continue its operations as an independent entity.

In October 2018, Coinbase raised $300 million in its series E funding round, with the company’s valuation then put at over $8 billion.

Since then, Coinbase has rebranded its Earn.com platform to Coinbase Earn, and Blockspring has become the first acquisition since that financing round.

Coinbase acquired Earn.com in April 2018 at a cost of $120 million, one amongst 9 other acquisitions before its latest one. The others include Paradex, Distributed Systems, Keystone Capital, Digital Wealth, and Cipher Browser.


Disclaimer: This is not investment advice. Cryptocurrencies are highly volatile assets and are very risky investments. Do your research and consult an investment professional before investing. Never invest more than you can afford to lose. Never borrow money to invest in cryptocurrencies.

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Coinbase’s crypto operations in the UK boosted by a new compliance officer with 30 years of …

Coinbase, a leading cryptocurrency exchange in the United States, is keen on strengthening its crypto operations in the United Kingdom with the …

Coinbase, a leading cryptocurrency exchange in the United States, is keen on strengthening its crypto operations in the United Kingdom with the addition of a new compliance officer.

The exchange is seemingly livingup to a statement it’s UK CEO issued early last year that it will continue toadd the number of staff at its UK office in a bid to expand its cryptooperations in the country.

Mark Kelly, the new head ofcompliance, is leaving Abide Financials, a regulatory reporting firm in the UK,where he served for roughly 5 years. From his social media profile, Kellyreportedly joined Coinbase’s UK office in January this year.

According to Yahoo:

While at Abide, Kelly advised clients on regulatory compliance areas such as anti-money laundering rules, the EU’s Markets in Financial Instruments Directive and the European Market Infrastructure Regulation

Apartfrom Abide, Kelly has in the past held notable positions in compliance and orauditing in respected companies in the UK such as Barclays Capital, LehmanBrothers, and Grant Thornton.

The exchange’scrypto operations in the United Kingdom are guided by an e-money license whichit received from the Financial Conduct Authority, UK’s financial watchdog. The licensealso allows Coinbase to operate in other countries in the European Union.

In therecent past, Coinbase has been laying off and at the same time bringing in newstaff mostly those at the middle and the senior levels.

Early last year, Zeeshan Feroz, Coinbase’s UK CEO, said that they are on a hiring spree “across its London teams” as crypto operations in Europe to gain momentum.

As CoinbaseUK boosts its crypto operations by hiring Kelly, do you think to have a strong compliance team will boost theexchange’s crypto operations in the United Kingdom?

Letus know your thoughts in the comments section below.

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Coinbase UK Legal Counsel: ‘Big Developments’ Expected this Year For Cryptoassets

Marcus Hughes, the lead counsel of the European region for US-based crypto exchange Coinbase, has predicted that there will be more …

Marcus Hughes, the lead counsel of the European region for US-based crypto exchange Coinbase, has predicted that there will be more comprehensive and progressive cryptocurrency regulations that will be introduced this year.

Hughes, a former executive director at Morgan Stanley’s UK division, said in a recent interview with Forbes that the crypto industry will “see big developments” within the “next year or two.” He added that Europe will lead the way in developing a proper cryptoasset regulatory framework.

Financial Conduct Authority Sends Consumer Alerts Regarding 39 Crypto Firms

UK’s financial regulator, the Financial Conduct Authority (FCA), is reportedly planning on prohibiting the sale of cryptocurrency derivatives products. Last month, the UK’s government had announced it would allow the FCA to monitor all cryptocurrency-related businesses in the country.

As CryptoGlobe reported in later December 2018, the FCA revealed it had ongoing investigations into 18 local firms that were involved in cryptocurrency transactions. In total, the FCA had launched 67 investigations into the operations of UK-based companies dealing in cryptoassets. After closing 49 cases, the regulatory authority had issued consumer alerts regarding 39 firms.

Nicky Morgan, the chair of the UK House of Commons Treasury Select Committee, remarked: 

It is clear that the government and the FCA share the committee’s concerns on cryptoassets, including the lack of regulation, minimal consumer protection and anonymity aiding money laundering … The committee will keep a close eye on these consultations and will continue to press for regulation.

Coinbase “Takes The Long View On Bitcoin”

Meanwhile, Hughes believes:

We could end up with EU member states creating their own crypto laws, but it’s certainly possible we’ll get a unified approach in Europe. It would make life for companies like Coinbase a lot easier.

Notably, Hughes revealed that his former colleagues at Morgan Stanley think bitcoin (BTC) and other cryptocurrencies “now have staying power”, meaning the emerging asset class will not “go away any time soon.” He also said:

Coinbase takes the long view on bitcoin and wider cryptocurrency prices. We need to move beyond the speculation phase … to the utility phase. The utility phase will mean [cryptoassets] become more widely accepted and understood.

According to Hughes, there are many more large financial institutions that may be interested in investing in digital assets. However, these institutional investors might still be waiting on the sidelines due to a lack of proper regulations for cryptoassets. He believes “regulation will help a lot, in particular around custody offerings” for digital currencies.

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