Korea’s largest crypto exchange sold fake assets

Bomi Yoon

A pedestrian walks by the headquarters of Upbit in Seoul in this 2018 file photo. Yonhap

By Lee Yeon-woo

Counterfeit cryptocurrencies were sold as genuine assets on Upbit, Korea’s largest crypto exchange. After an internal review, Upbit is now working to bring those back.

According to Upbit, Tuesday, fake cryptocurrencies from unidentified sources were deposited into multiple accounts of Upbit, misappropriated as assets from Aptos (APT). During the deposit process, Upbit mistook some of these for genuine APT assets, which led some customers to unknowingly trade the counterfeit tokens for real cryptocurrencies.

Upon discovering the issue on Sunday, the exchange temporarily halted deposits and withdrawals from APT at 3 p.m., Sunday, resuming transactions at around 11 p.m.

The counterfeit assets amounted to a total of 20 million won ($14,800). Upbit has already recovered two-thirds of the fake APT and is actively working to retrieve the rest, a company official said.

The issue arose due to a recently added function on APT, which permits users to issue modified versions of native APT coins using its mainnet platform. Cryptocurrency exchanges typically record coins that register a customer’s digital asset wallet into their account balance. However, during this process, Upbit mistakenly identified both counterfeit coins and the native coins as APT, failing to distinguish between the two.

While this is not the first time a local cryptocurrency exchange has encountered a computational error, it’s unprecedented for fake coins to be accepted and recorded as legitimate on such a platform. Market watchers have pointed out that conflating counterfeit coins with genuine ones significantly damages trust in the exchange’s technological integrity ― more so when considering Upbit’s status as the country’s largest exchange.

Responding to the criticisms, Upbit stated that the error was “temporary” and the situation was fully resolved by Sunday. “We apologize for the inconvenience caused,” Upbit said.

When Upbit suspended transactions of APT on Sunday, its price saw a temporary and sharp increase. The price, which stood at 6,900 won as of 8 p.m. on Sunday, shot up to 9,400 won following the exchange’s announcement. As of 2 p.m. on Tuesday, the price has decreased to around 7,400 won.

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