[2021 National Audit] "Upbit Supports Backdoor Listing Through Indonesian Subsidiary"

"Failure to Immediately Implement Customer Confirmation System After Report Acceptance Announcement Is a Special Favor by Financial Authorities"

[Image source=Yonhap News]

[Asia Economy Reporter Gong Byung-sun] Domestic cryptocurrency exchange Upbit has been accused of supporting the indirect listing of cryptocurrencies through overseas subsidiaries to benefit a specific foundation. Additionally, there are allegations that the financial authorities granted special favors by not immediately enforcing the Know Your Customer (KYC) system after approving the registration.

At the National Assembly’s Financial Services Commission (FSC) and Financial Supervisory Service (FSS) audit held by the National Assembly’s Political Affairs Committee on the 21st, Yoon Chang-hyun, a member of the People Power Party, raised suspicions that certain forces profited when cryptocurrencies such as Milk (MLK), DicarGo (DKA), and Ton (TON), which were listed on Upbit Indonesia, were listed on domestic Upbit.

These cryptocurrencies, which were listed on domestic Upbit from February to August last year, surged immediately after their indirect listings, and it is alleged that manipulation groups began selling at the peak, causing losses to general investors. For example, Milk, which was listed on domestic Upbit on February 21 last year, opened at 1,620 KRW on the listing day, doubled to 2,620 KRW, but then halved to 1,250 KRW within seven hours.

Similarly, Ton and DicarGo, which were listed on July 14 and August 25 last year respectively, showed about a 30% increase immediately after listing but plummeted back near the opening price within 7 to 8 hours.

Yoon also raised suspicions that Upbit received special treatment from financial authorities due to the delayed implementation of KYC. Although the Financial Intelligence Unit (FIU) under the FSC announced on the 17th of last month that it had accepted Upbit’s virtual asset service provider registration, Upbit only implemented KYC on the 6th of this month.

Upbit responded to these allegations. A representative from Upbit explained, “Domestic Upbit did not hold shares in the Indonesian subsidiary where Milk, DicarGo, and Ton were listed,” and added, “Indirect listing is structurally impossible.” Regarding the criticism that the delay in KYC implementation was a special favor, the Upbit representative stated, “We did not provide a specific schedule because we had not received the acceptance certificate,” and “We received the acceptance certificate on the 5th and started KYC immediately the next day, on the 6th.”

Meanwhile, Min Hyung-bae, a member of the Democratic Party of Korea, pointed out that investor damage occurred during Upbit’s delisting process of cryptocurrencies. Min said, “Previously, Upbit designated 25 cryptocurrencies as watchlist items but only gave the companies a one-week period to explain themselves,” adding, “Being designated as a watchlist item is a shortcut to delisting.” He continued, “The resulting investor damage amounts to 500 billion KRW,” and “Most of the victims are in their 20s and 30s, and the FSC must come up with countermeasures.”