[Korean Exclusive News]
Author: Shin Yi Jin, South Korea
On Thursday, 7th June, local media reported that South Korea’s Cybercrime Investigation Unit of the Southern Provincial Police Department announced their decision to press charges against Coinone for its margin trading service.
Coinone, first opened in August of 2014, now ranks behind Upbit and Bithumb as South Korea’s third-largest cryptocurrency exchange, with a 24-hour trading volume of $34,342,088 according to Coinmarketcap.
South Korean law dictates gambling to be a crime under Chapter 23 of its Criminal Act. According to local media reports, the police will be recommending the prosecutor’s office to charge three Coinone executives including CEO Myunghun Cha with providing illegal gambling services from November 2016 to December 2017; while charging 20 Coinone members with illegal gambling.
The investigation of Coinone “on allegations that the exchange provided gambling services for margin trading” began in August 2017, with the police concluding that “the ‘margin trading’ service of the virtual currency exchange is gambling”. According to the police, “The case was the first investigation related to the operation of a virtual currency exchange and it took considerable time to review the law.”
Margin Trading vs Gambling: What is the Difference?
According to Yonhap, Coinone “allowed members to trade up to four times the amount of the deposit (margin) and to pay commission in exchange for the transactions”. The news outlet also added that “margin trading is similar to the credit trading technique of the stock market, but it was based on gambling because it was not authorized by the authorities and that it was targeting virtual currencies instead of stocks.”
Police investigations revealed that the 19,000 users who made use of Coinone’s margin trading service were between ages 20 to 50, with most of them being either office workers, unemployed or self-employed. Particularly, there were 20 members who traded over 3 billion won. (~2.8 million USD) Since gambling “can be used to collect criminal proceeds, and therefore interest in coins and margin users will be widened according to the results of the trial in the future.”, noted by Yonhap.
Coinone Denies Charges
“We do not think it is illegal because it [the service] has been legally reviewed by lawyers before [we started] the margin trading service.” This statement quoted from one of Coinone’s employees supports the stand of its executives throughout the investigation, as they maintained that they “did not know it was illegal because there is a similar service in the stock market.”