UPbit and Bithumb, two of the biggest cryptocurrency exchanges in South Korea and the global cryptocurrency market, have faced backlash and criticism from the local cryptocurrency market for the scandalous behavior since early May 2018.
UPbit Investigation Found No Irregularities
On May 13, 2018, BTCManager reported that the official investigation by the South Korean police, Korea Financial Intelligence Unit (KoFIU), and Financial Services Commission (FSC) into UPbit led the global cryptocurrency market to endure a correction, causing a domino effect across all major cryptocurrency exchanges. At the time, the UPbit team stated:
“UPbit is currently under investigation by the prosecution, and we are working diligently. UPbit services such as all transactions and withdrawals are operating normally. Your assets are kept securely in your account, so you can rest assured that you can use UPbit services.”
However, after a week since the investigation has started, the South Korean police and KoFIU have yet to announce the official findings from their investigation. Usually, in South Korea, if a raid and investigation fail to discover any irregularities, the South Korean government does not release additional information about the case.
Insiders have told local media outlets that the issue was UPbit’s support for dozens of cryptocurrencies without integrating native wallets. As such, while users have been able to trade those cryptocurrencies, they were not able to withdraw or deposit them directly to and from the exchange. The misunderstanding in the structure of UPbit’s trading platform and its liquidity issues ultimately led to the search and seizure.
The South Korean government has yet to release its final report on the UPbit case, but investors and the local cryptocurrency community have already started to disregard the case given that no irregularities were found in the exchange.
The UPbit case recently regained its spotlight as several sources reported that its main competitor Bithumb reported UPbit to the South Korean police and accused the exchange of fraud.
Mainstream media outlets and UPbit have not confirmed the accusation, but the speculation and the premature listing of a cryptocurrency called Popchain by Bithumb led the community to cast heavy criticism on Bithumb.
The uproar was prompted after the Bithumb team initiated an airdrop of a token called Popchain with the intent of listing the token in May 2018. It marketed Popchain as a token that would leverage a video sharing platform called Pop TV with millions of active users in order to bring value to the network.
To the chagrin of Bithumb, users found out that the open source code of Popchain was plagiarized from the source code of Dash, Monero, and bitcoin. Investors were particularly outraged by the fact that the Popchain team did not even bother to remove copyright marks on the source codes of the three cryptocurrencies.
Bithumb investors requested the exchange to cancel the listing of Popchain as it was revealed that the developers of Popchain were the individuals that developed Bithumb Cash, an ERC20 token Bithumb intended to release as its own cryptocurrency in 2018 but halted its plans due to regulatory issues. In response to the controversy, the Bithumb team said:
“The Bithumb team recognized the distribution of false facts and accusations about Popchain that eventually led investors to be concerned about the listing of the cryptocurrency. The Bithumb team will wait until the cryptocurrency is listed on other major cryptocurrency platforms and decide after evaluating its market performance.”
Due to the Bithumb and UPbit scandal along with the controversy surrounding the country’s two most significant exchanges, investors in the South Korean cryptocurrency market have become concerned, fearing instability in the local exchange market.