UPDATED | May 14, 2018:
On Sunday, May 13, 2018, The Korea Times reported that South Korea's Financial Services Commission (FSC) is "looking into [cryptocurrency] exchanges' corporate accounts opened in local banks," according to a senior FSC official. It appears that Bithumb, based in Seoul, is one of the businesses under scrutiny.
One of the FSC representative's colleagues added, "Our latest findings show that the domestic exchange faked its balance sheets and deceived investors. The FSC is checking UPbit's computer system with prosecutors and the FSS [Financial Supervisory Service] to audit the exchange's virtual currency holdings."
ORIGINAL | May 11, 2018:
Reports indicate that the trading platform is suspected of fraudulent activity over inaccurate representations that it allegedly made regarding the amount of cryptocurrency it has in its possession. As far as ETHNews was able to determine, charges had not been formally brought against the exchange or any of its personnel by press time.
A statement was posted on the exchange's website today to inform customers that "[Upbit] is currently under investigation," but that "services such as all transactions and withdrawals are operating normally" and "assets are kept securely in your account, so you can rest assured that you can use [Upbit's] services."
While the Korean government has a history of intervening in the cryptocurrency space, motivated initially by concerns around wild speculation and know-your-customer practices that it considered inadequate, several of its more recent actions have been prompted by fraud allegations.
Specifically, officials have conducted raids on three exchanges in addition to Upbit. The CEO of one of those platforms, Coinnest, was arrested on suspicion of embezzlement and fraud as a result of the inquiry into that exchange's operations.
Translations by Google.