On Aug. 26, the South Korean newspaper Seoul Shinmun published a report stating that 99% of transaction volume was faked through wash trading on Coinbit, one of the largest cryptocurrency exchanges in South Korea, between August 2019 to May 2020. Though the exchange was seized by police under allegations of fraud, this is not the first instance in which a cryptocurrency exchange has been accused of wash trading.
In March 2019, Bitwise Asset Management told the U.S. Securities and Exchange Commission (SEC) in its presentation that 95% of bitcoin trading volume globally is fake and/or non-economic in nature. In fact, the largest crypto exchange from South Korea, Upbit, has also been under scrutiny for wash trading after its officials were indicted for fraud in late 2018. This article will examine why exchanges conduct wash trading and analyze the Coinbit wash trading fiasco in detail.