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South Korea's biggest cryptocurrency exchange is "Not at Fault" according to the latest audit outcome on UPbit. A leading accounting firm in South Korea has communicated the results of an audit performed on UPbit's cryptocurrency holdings; the auditors confirmed that the exchange did not deceive investors by inflating its balance sheet.
UPbit Police investigation results to be released later this week.
UPbit South Korea's largest cryptocurrency exchange is under an official police investigation with the aide of the Financial Supervisory Service (FSS) and the Korea Financial Intelligence Unit (KIU). Last week, the Korean police force raided the head offices of UPbit as part of their investigation into the practices of the exchange, police received tips that the exchange had allegedly processed cryptocurrency trades without holding user funds.
The local authorities accused the exchange of operating its order books without holding cryptocurrencies and pretended to store large amounts of user funds in Bitcoin, Ethereum, Litecoin and other cryptocurrencies.
At the time of reporting, several sources (insider) have stated the investigation originated from a liquidity issue due to the fact UPbit only operated wallets of approximately 90 cryptocurrencies even though the exchange has listed closer to 130 cryptocurrencies.
The 40 or so cryptocurrencies on UPbit that have yet to be integrated into its independent wallets have frustrated users, who are unable to make deposits or withdraws directly from UpBit and have to exchange the assets to other cryptocurrencies (i.e. Bitcoin and Ethereum) before withdrawing.
The lack of support for these cryptocurrencies led to the investigation and authorities accusing UPbit of inflating its balance sheet.
According to MondeyToday: "UPbit have created snapshots of its multi-signature wallets and funds stored within them since early 2018 for auditing purposes. Accounting firm Yoojin, a leading firm based in Seoul, confirmed the funds used on the UPbit platform matches that of the cryptocurrency holdings held in its multi-signature wallets."
So what happens to UPbit?
Although the exchange is still under ongoing investigation, UPbit has been fully operational and continued to process trades for its members. Based on the Yoojin audit report, it is most likely the government investigation into the exchange will end with a simple issue in liquidity and if the auditor's report is accurate, UPbit should not suffer from any exposure from the recent case as it originates from a simple misunderstanding of the exchange's wallet structure.
If the recent collapse in the cryptocurrency market is due to the ongoing investigations into UPbit, it will likely recover as soon as the official result of the investigation is released by the Korea Financial Intelligence Unit. The South Korean cryptocurrency community itself has already started to dismiss the UPbit investigation after the Yoojin report was released.
UPbit is the multi-billion dollar company, operated by the country's biggest technology group Kakao. Investors remain confident in UPbit.