Two of the leaders of the South Korean crypto exchange Komid, were arrested and sentenced to jail after they were accused of faking the exchange volumes, according to the crypto news media outlet reports from South Korea.
One of the leaders was Komid’s CEO with the last name Choi who received a three-year sentence while the other one, who is also among the company leaders, was sentenced to two years in prison for misconduct, embezzlement, and fraud.
According to the charges, both of them outlined a scheme where the exchange was able to fake 5 million transactions thus inflating the volume and at the end, it led to them making a huge profit of $45 million. The company reportedly used an auto-bot to create large orders and attract new users.
The judge was quoted saying:
“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.”
Last year in December, one of the largest crypto exchanges in South Korea Upbit was accused of manipulating their order book after regulators indicted a couple of their staff. However, the exchange was quick to deny the accusations.
Following the reports from the Seoul District Prosecutors Office, the Korea Times pointed out that two senior executives from Upbit and one employee from the same company have been indicted but they were not detained for further investigation purposes.
At the same time and in the same month, South Korea-based crypto exchange Bithumb was also accused of faking its trade volume but they too denied the allegations.
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South Korea Ends $18 Million Crypto Ponzi Scheme With The Help Artificial Intelligence (AI)
“Through keywords such as Ponzi, loan and recruiting members, we were able to teach the AI patterns of Ponzi schemes. The program can also identify advertisement patterns and identified the enterprise in question, which [was caught] with evidence provided by an unnamed informant.”The CEOs of the scheme, known as Lee and Bae, amassed a lot of money through selling private digital tokens named M-Coin which posed to be a real altcoin, along with membership fees from recruits, as the publication states. The figures also took advantage of the public's lack of knowledge of the crypto space to part them from their fiat investments.
“In our stakeout, we saw that most people attending the swindler’s presentation for membership were elderly people in their 60s and 70s,” Hong Nam-ki added.Currently, Ponzi schemes still remain a persistent phenomenon despite the increasing legitimacy of cryptocurrency in the public eye. This is obviously not the first (or the last) crypto ponzi scheme that exists out there - and will hopefully not be the last to be spotted with the help of artificial intelligence (AI). Earlier this year, authorities caught up with the controllers of OneCoin which is a notorious international quasi-pyramid scheme which ran for several years.
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Crypto Giant Coinbase Taps Into A $255 Million Customer Insurance Policy Program
"The data is clear that, today, the most likely consumer loss scenario for any cryptocurrency company is hot wallet loss due to hacking."Martin also touched on the possible scenarios and how Coinbase's insurance policies give customers peace of mind that the Bitcoin or altcoin savings they hold at the exchange is protected from losses.
“If the worst happens and Coinbase loses customer funds, customers deserve certainty that they will be made whole,” he wrote.According to experts, the worst case scenarios for losses in this manner break down to two categories: crime and specie. While crime covers losses caused by criminals who hack, steal and conduct fraud transfers, insider trading losses are also covered. On the other hand, the Specie coverage kicks in whenever there is a physical damage or theft or private key data in cold storage. As Martin explained:
“Crime policies would not generally cover the costs of incident response, PR costs, etc. Crime policies also don’t generally cover failures of the underlying currency (e.g. 51% attacks). Coverage for hot wallet exposures are also significantly more expensive than cover for cold storage alone.”He also had plenty to say about why is insurance important for crypto companies and what it should cover.
"Companies should focus on insurance for value in flight. This means that exchanges and wallets should have sufficient Crime coverage to fully cover their hot wallets (including enough buffer to handle asset price spikes)," Martin added.He concluded with a statement in which he said that Coinbase is working with regulators and insurers to create more insurance solutions in different areas.
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