Korean crypto firms relocating for cheaper rent amid prolonged crypto winter

South Korea: Crypto Exchange Execs Indicted on Manipulation ChargesA number of executives at Coinone, one of South Korea’s leading cryptocurrency exchanges, have been indicted on charges related to market manipulation.That’s according to a report published by South Korean news outlet, The JoongAng, on Monday. The complaint details no less than forty-six coins that are alleged to have been the subject of manipulation in some form. That represents one in four of the total number of coins that the exchange has enabled for trading on the platform.Photo by Burak The Weekender on PexelsFour executives indictedThe indictment lists four Coinone executives, Mr. Jeon, Mr. Kim, Mr. Ko, and Mr. Hwang. The four have been charged with employing illegal mechanisms to manipulate coin listings, resulting in the four executives profiting to the tune of 2.98 billion Korean Won, which amounts to $2.26 million dollars according to current fx exchange rates.The complaint specifies that these offenses were committed between December 2019 and November 2022. South Korean prosecutors further allege that prior to various projects obtaining a token listing on Coinone, company executives made them sign third-party market-making contracts. That in and of itself is not unusual.One of the key aspects of a new coin listing (and an ongoing listing for that matter), is the need to have sufficient liquidity in place to ensure that the coin can be traded without being susceptible to market manipulation. Low liquidity conditions open the door to bad actors moving the market relative to a particular token.Cross tradingThe indictment is far more specific in calling out illegal cross trading activity. It’s likely that these key Coinone employees would have been expecting such an indictment to land at their doors. Last week, it emerged that LUNA tokens associated with Terraform Labs’ failed Terra USD (TUSD) algorithmic stablecoin project, had been illegally cross traded on three South Korean crypto exchanges: Bithumb, GoPax and Coinone.Cross trading is the practice of trading an asset on an exchange without recording the transaction transparently on the exchange. Strictly speaking, the activity can be legitimate although most exchanges prohibit the practice as it can be used to affect market manipulation.A cross trade could be permitted in a scenario where the price is deemed to be competitive at the time that the trade takes place. While this can more easily be determined in conventional markets as the practice is covered by specific regulation, that’s not the case in most jurisdictions right now where digital asset trading is concerned. By extension, there’s a complete lack of transparency and a lack of reporting.As other market participants don’t have visibility of this type of trading activity, they are unaware as to whether a better price is available on the market or not. In an unregulated state, the practice undermines trust.In the case of Coinone, the executives enabled the practice in order to provide an illusion with regard to trading activity. That meant that trading volumes claimed were inaccurate, misleading ordinary traders and exchange users. Along with trading volume in these coins being artificially boosted, so too were token prices.In the indictment, prosecutors explicitly alleged that cross trading was being employed in an illegal manner:“This price manipulation causes misunderstandings about the trading volume and market price among general members of the exchange, and induces [service users] to participate in the coin transaction and buy the coin.”

Singapore’s Terraform Labs, the company founded by incarcerated crypto entrepreneur Do Kwon, has filed for Chapter 11 bankruptcy protection as a mechanism to shield itself from potential severe penalties in the U.S. Securities and Exchange Commission's (SEC) securities fraud lawsuit.Photo by Melinda Gimpel on UnsplashPursuing an appealThe bankruptcy filing, submitted on Tuesday in the U.S. Bankruptcy Court for the District of Delaware, aims to allow Terraform Labs to pursue an appeal against the SEC's allegations. In the filing, Terraform Labs CEO Chris Amani emphasized the critical nature of the bankruptcy protection for the company's ongoing operations, preservation of value for creditors, including the Terra community, and the pursuit of an appeal against the SEC enforcement action. Amani expressed concerns that, without Chapter 11 protection, the company could face liquidation after the trial, forfeiting its right to appeal and leading to disastrous consequences for its business. Having acted as Terraform’s chief operating officer earlier in 2023, last July Amani was appointed as the firm’s CEO. Protection afforded by Chapter 11The estimated assets and liabilities of Terraform Labs fall between $100 million and $500 million, as disclosed in the firm’s bankruptcy filing earlier this month. Amani highlighted the potential financial strain resulting from a substantial money judgment, indicating that the company might not be able to satisfy such a judgment or post the necessary supersedeas bond for an appeal, a bond that must be provided by a petitioner who attempts to have a judgment set aside, without the protection afforded by Chapter 11. The SEC charged Terraform Labs and former CEO Do Kwon with securities fraud in February 2023, accusing them of orchestrating a "multi-billion dollar crypto asset securities fraud." The Commission claimed the company raised billions from investors through unregistered transactions, offering an interconnected suite of crypto asset securities. Terraform Labs disputes the SEC's summary judgment decision, asserting that the cryptocurrency tokens in question are not securities under the Acts and that the SEC's jurisdiction is not applicable. The potential consequences of liquidation extend beyond the company itself, impacting hundreds of thousands of Luna cryptocurrency holders, the same individuals the SEC purportedly seeks to protect. Luna operates on the Terra blockchain maintained by Terraform Labs. Terraform Labs, known for the algorithmic stablecoin TerraUSD and its sister cryptocurrency Luna, filed for bankruptcy protection in the wake of the infamous collapse of both in May 2022. The SEC's case stems from that $40 billion collapse of TerraUSD and a previous version of Luna, accusing Terraform Labs and Kwon of misleading investors about the stability of TerraUSD. Kwon was arrested in March of last year in Montenegro for using false documents. He is currently detained in Montenegro, following his attempt to travel to Dubai with a fake Costa Rican passport. The Terraform founder is currently awaiting extradition to either the United States or South Korea. Both Do Kwon and Terraform Labs deny committing fraud, with the SEC trial scheduled to commence in New York in late March.   

Korean Blockchain Firm Proposes Fintech Collaboration in CambodiaSouth Korean fintech and blockchain company KONDOR recently made an announcement through a press release regarding the establishment of a blockchain fintech advisory board in Cambodia. The firm has proposed a business agreement to the Securities and Exchange Regulator of Cambodia (SERC) with the aim of ensuring sustainable growth in the financial sector and capital markets.Photo by allPhoto Bangkok on PexelsFintech advisory boardThe advisory board comprises experts from various fields, including finance, economics, law, blockchain technology, fintech, and artificial intelligence. They will function independently, offering counsel on policy decisions.Sou Soucheat, Director General of SERC, highlighted that Cambodia is currently in the process of rebuilding and has a youth-driven economy and financial markets. He sees the collaboration with KONDOR as a valuable opportunity to develop a future-oriented financial system.The advisory board will see participation from KONDOR and other notable members, namely VEXK, a global digital asset exchange in Vietnam; Blue Contents, a Honolulu-based digital economy research center; and the Paññāsāstra University of Cambodia, a key player in the country’s educational field.KONDOR and VEXK have put forth a proposal for the joint establishment of a trust company and the pursuit of a custody license in alignment with Cambodia’s revised trust law of 2019.Procuring licensesFollowing the proposal’s approval, VEXK plans to procure a license as a digital asset exchange, as well as a license to establish a trust company. This would enable VEXK to effectively oversee clients’ digital and physical assets through accounts within the established trust company. The safety of these assets will be ensured through insurance coverage provided by reputable global insurers. Furthermore, VEXK will acquire the ability to facilitate USD trading and will retain the digital asset exchange license for five years.The license application will gain support from the SDG Impact Fund, a US-based organization managing $11 billion worth of assets, and the Estates & Infrastructure Exchange (EIX), a project bond exchange based in London.EIX CEO Mark Worrall said that active support from a securities regulator in the dynamic and expanding Web3 era would certainly contribute to Cambodia’s economic growth.