South Korea is overcrowded with cryptocurrency exchanges. More than 200 exchanges are operating. Even unlike casinos, many of them are ridden with frauds. They are outside government oversight.
These fraud-ridden exchanges have been cropping up as unlike the United States and Japan, South Korea has no regulation.
One prime example was PureBit last November. Even before its pre-announced formal opening, it swapped its non-existent PureCoin for more than 10,000 Etherium from investors. The Purebit operator disappeared after cashing the Etherium, leaving hundreds of investors losing money.
The Boombit exchange shut down in January three months after its opening. The Roobit exchange tried to close its operation for its online technical glitches before resuming its operation following complaints from investors.
Many exchanges have arbitrarily frozen cash withdrawal and deposit, artificially increase trading to lure investors.
One price per the same cryptocurrency does not exist. Multiple prices are quoted in different exchanges. For example, an exchange cited Nexo coin at 100, but Coinbit quoted the rate at 4,000. Angry Seoul investors complain that crypto coins are no better than casino chips.
Calls are growing for the government to look into these parasite exchanges. Many blockchain startup executives say more and more investors would fall victim to the frauds unless the government cracks down on the fraudsters.
In South Korea, anyone can open an exchange freely because the government does not regulate cryptocurrencies and exchanges. Although banks seldom allow investors to open accounts with exchanges, many exchanges trade cryptocurrencies by opening corporate accounts into which investors send money.
Once funds are in the corporate accounts, many exchange operators shut down their operations and hid away.
Many exchanges have been attracting investors through high-pitched marketing, even showering ‘air dropping’ coins to investors.