CoinOne has been put on the spot by South Korean authorities for allegedly providing margin trading that is considered borderline illegal gambling.
The cybercrime investigation department of South Korea’s provincial police department says it wants CoinOne to face legal charges for running illegal gambling through margin trading. The cybercrime unit also claims that the crypto exchange might have been using the service to launder illegal proceeds. The police department has based its accusations on investigations that it has been running for about ten months during which it discovered that roughly 9,000 users on the platform were involved in margin trading. Their attention was particularly on 20 traders as a result of their high trading volumes.
The 20 individuals identified for their high-volume trading have reportedly dealt with more than 3 billion won equivalent to $2.8 million, which was involved in margin trading through the CoinOne platform. Margin trading is considered illegal in the country based on existing regulations.
It seemed like an attractive offering for CoinOne but unfortunately, there is more to this story than meets the eye. Three CoinOne executives including CEO Myunghun Cha, are facing legal action for gambling using margin trading on their platform. The crypto exchange released a statement saying it is currently focused on cooperating with the authorities in the investigation, which is still ongoing. The statement also confirmed that the case is in the process of moving to the prosecution phase.
CoinOne has been offering margin trading since November 2016 and reportedly stopped the service in December last year. However, the South Korean police department launched the investigation in August 2017. This means the investigation was one of the earliest efforts made by authorities towards investigating how local cryptocurrency exchanges have been running their operations.
CoinOne’s margin trading investigation is the latest scandal to involve a cryptocurrency exchange and unfortunately, such scandals end up affecting users of an exchange. Sometimes such reports even affect cryptocurrency prices. For example, Bitcoin (BTC) has lost value in the past after the announcement of scandals pertaining various to exchanges, including exchanges being hacked. Meanwhile, although margin trading is outlawed in South Korea, it also exists in the stock market.