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© Bloomberg

South Korean prosecutors have detained top executives of two cryptocurrency exchanges for alleged embezzlement and fraud as authorities crack down on virtual currency trading in one of the world’s most exuberant bitcoin markets.

The Seoul Southern District Prosecutors’ Office said on Thursday that Kim Ik-hwan, the chief executive of Coinnest, South Korea’s fifth-largest cryptocurrency exchange, and another head of a different cryptocurrency exchange were under their custody, along with two other executives at the exchanges. 

The four executives were accused of swindling their customers’ digital assets as cryptocurrency trading volume in South Korea, once the world’s third-largest, has dwindled to just five percent of last year’s peak trading volume because of the government clampdown on virtual currencies. 

The move comes as South Korea steps up its regulation on digital currency trading although it has not pushed through with its previous threat to ban cryptocurrency trading.

Local exchange operators have complained of damped trading after the government has made real-name trading of virtual currencies mandatory since the end of January.

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The Financial Times Limited 2018. All rights reserved.

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