Komid Fraudulent Platform Withdrawals

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Komid

The Komid cryptocurrency exchange misled investors into believing their service was highly popular when it wasn't, created fake assets, and took funds from investors into personal wallets.

The website displayed a 403 error starting in January 2019. Two lead executives from the exchange have each received prison sentences for their role in what happened.

While this case did involve wash trading, this is likely not the reason for the jail time. Rather, the jail time likely results from stealing investor assets and creating false platform assets on purpose.

This exchange or platform is based in South Korea, or the incident targeted people primarily in South Korea.

About Komid

"Korea's leading cryptocurrency exchange - [Komid] will not only provide a smooth trading system, but also create the most secure exchange."

"Komid Co., Ltd. Representative: Choi Woo-hyuk 05510 The Sharp Star Park Building A, 4th floor, 10 Olympic-ro 35ga-gil, Songpa-gu, Seoul 05510 Business registration number: 449-86-00761"

"[A] new standard for cryptocurrency exchanges. Start convenient and secure trading on an exchange that prioritizes user asset protection."

"Choi, the court found, made a number of fake accounts on the exchange in January 2018, and, using a trading bot, made millions of false transactions with cryptocurrency and Korean won credit that did not actually exist."

"Choi and Park allegedly created five accounts through which they were able to fabricate 5 million transactions. According to the court documents, the faked volume deceived both investors and new users, which led to Choi and Park earning about $45 million in fees."

"The fakery was reportedly designed to give investors a false sense of liquidity and action on the exchange."

"Authorities arrested two men behind Komid who were scamming investors from the start. Their scheme entailed luring customers to cryptocurrencies, and disseminating false information about token listings." "According to a report from CoinDesk Korea, the firm's CEO Hyunsuk Choi received a three-year sentence for his role in the crime, as well as for embezzlement. Another member of the team, Park Mo, got two years, according to local news source Blockinpress." "Prosecutors claim the two created crypto trading accounts under false names and using specialized bot software to generate 50 billion won in wash trades on Komid and, “automatically create large orders to attract customers.”"

"On [January] 17th, the 13th Criminal Settlement Division of the Seoul Southern District Court (Chief Judge Ahn Seong-joon) sentenced Komid CEO Mo Choi to three years in prison and executive director Mo Park to two years in prison, who were charged with forgery, fraud, embezzlement, and breach of trust in electronic records. . Choi has been arrested in court." "Komid Choi has reportedly been sentenced in Seoul to three year’s imprisonment for fraud and embezzlement, and an accomplice, Park Mo, has been sentenced to two years." "Korean authorities sentenced two executives at Komid, a South Korean cryptocurrency exchange, to jail terms on January 17 for their role "in orchestrating fraudulent trading volume" as reported by Blockinpress. CEO Hyunsuk Choi received 3 years another executive, named Park, received 2 years."

"The judge claimed the accused said Korean financial authorities were remiss in not stopping his behaviour." “Mr. Choi has repeatedly committed fraud against a large number of victims in an unspecified amount of time.” “The accused has been responsible for blaming the financial authorities and not regretting the mistake.”

"The court discovered that Choi has had a number of fake accounts on the exchange in January 2018 and was using a trading bot to make millions of false transactions with cryptocurrency and Korean won credit, that in reality did not actually exist." "The court presided over by South Korea’s top judge Ahn Seong-joon, also concluded that Choi transferred bitcoin from the exchange to an external wallet." "In fact, they have deceived investors as if they were operating normally without having that much capital or cryptocurrency."

"However, Edaily has highlighted that the judge considered the fact that the harm was minimal as some portion of funds were returned. Furthermore, the judge noticed that “the defendants did not appear to have committed a crime with strong fraudulent intentions.”"

"Choi has committed fraud for a countless number of victims for a long period of time ... Futhermore, he holds the financial authorities responsible for failing to keep track of the industry better." "The court – presided over by South Korea's top judge Ahn Seong-joon – also ruled that Choi had transferred bitcoin from the exchange to an external wallet, said CoinDesk Korea."

"The judge said that "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 was the first time that a cryptocurrency exchange executive received jail time for faking volume. Wash trading, the creation of artificial trading activity, is a common practice in the cryptocurrency space."

This exchange or platform is based in South Korea, or the incident targeted people primarily in South Korea.

The background of the exchange platform, service, or individuals involved, as it would have been seen or understood at the time of the events.

Include:

• Known history of when and how the service was started.
• What problems does the company or service claim to solve?
• What marketing materials were used by the firm or business?
• Audits performed, and excerpts that may have been included.
• Business registration documents shown (fake or legitimate).
• How were people recruited to participate?
• Public warnings and announcements prior to the event.

Don't Include:

• Any wording which directly states or implies that the business is/was illegitimate, or that a vulnerability existed.
• Anything that wasn't reasonably knowable at the time of the event.

There could be more than one section here. If the same platform is involved with multiple incidents, then it can be linked to a main article page.

The Reality

This sections is included if a case involved deception or information that was unknown at the time. Examples include:

• When the service was actually started (if different than the "official story").
• Who actually ran a service and their own personal history.
• How the service was structured behind the scenes. (For example, there was no "trading bot".)
• Details of what audits reported and how vulnerabilities were missed during auditing.

What Happened

The specific events of the loss and how it came about. What actually happened to cause the loss and some of the events leading up to it.

Key Event Timeline - Komid Fraudulent Platform Withdrawals

Date	Event	Description
January 17th, 2019	Main Event	Expand this into a brief description of what happened and the impact. If multiple lines are necessary, add them here.

Technical Details

This section includes specific detailed technical analysis of any security breaches which happened. What specific software vulnerabilities contributed to the problem and how were they exploited?

Total Amount Lost

The total amount lost is unknown.

How much was lost and how was it calculated? If there are conflicting reports, which are accurate and where does the discrepancy lie?

Immediate Reactions

How did the various parties involved (firm, platform, management, and/or affected individual(s)) deal with the events? Were services shut down? Were announcements made? Were groups formed?

Ultimate Outcome

What was the end result? Was any investigation done? Were any individuals prosecuted? Was there a lawsuit? Was any tracing done?

Total Amount Recovered

There do not appear to have been any funds recovered in this case.

What funds were recovered? What funds were reimbursed for those affected users?

Ongoing Developments

What parts of this case are still remaining to be concluded?

General Prevention Policies

The primary issue came from the lack of accountability to customer assets, which posed the risk of loss to investors, and transformed the platform into a form of ponzi scheme.

While the executives should take personal responsibility for their actions, they are correct that without enforcing transparency and accountability, such fraud will continue to happen.

Individual Prevention Policies

No specific policies for individual prevention have yet been identified in this case.

For the full list of how to protect your funds as an individual, check our Prevention Policies for Individuals guide.

Platform Prevention Policies

Policies for platforms to take to prevent this situation have not yet been selected in this case.

For the full list of how to protect your funds as a financial service, check our Prevention Policies for Platforms guide.

Regulatory Prevention Policies

No specific regulatory policies have yet been identified in this case.

For the full list of regulatory policies that can prevent loss, check our Prevention Policies for Regulators guide.