South Korea: 16 people arrested for forex transactions related to allegedly illegal digital assets

South Korea’s crackdown on the market’s exploitation of “premium Kimchi” digital assets through illegal currency trading has continued to grow. The South Korean Customs Service has arrested 16 people allegedly involved in illicit foreign exchange transactions related to digital assets.

As local news outlet Newsis reported, the arrests stem from an investigation that began in February. The investigation was based on information collected by customs authorities and foreign exchange data from the Korean Financial Intelligence Unit (FUI) on illegal transactions worth KRW 2.7 trillion (about $2 billion). at time of writing).

More than KRW 380 billion ($283 million) of the reported transactions were facilitated by illegal money transfer agencies linked to the individuals. Another KRW 68.7 billion ($50 million) were illegal withdrawals from paper companies with which the individuals settled or are linked.

Two of the 16 unnamed individuals have been taken to court to face charges of operating and dealing with digital asset entities that violate Korea’s foreign exchange transaction law. The regulations were amended in 2017 to stipulate that entities involved in digital asset transactions must obtain regulatory approval from the Financial Services Commission (FSC).

In the meantime, negligence-related fines have been issued to a further seven people, while the remaining seven are under further investigation. In a briefing, Lee Min-geun, director of the Seoul Customs Investigation Bureau, 2nd Investigation Bureau, said it is likely that the activities the individuals are linked to are also in violation of the law. on the exchanges.

“There is a strong possibility that foreign exchange transactions aimed at taking advantage of the market capitalization of domestic and foreign virtual assets violate the law on foreign exchange transactions,” he said.

The report added that the customs department intends to set up a dedicated investigation team in cooperation with the Seoul Central District Prosecutor’s Office.

Digital assets are now the main source of illegal transactions in the foreign exchange market in South Korea

According to a Bloomberg report, citing data from the Customs Service, the digital asset market hit a new high in 2022 as the main source of illicit foreign exchange transactions in South Korea. The data showed that almost 70% of transactions violating foreign exchange rules in the country are related to digital assets, up from 61% last year.

In particular, the data of the customs services are not linked to the files processed by the Financial Monitoring Service (FSS). The FSS investigation of local banks has so far revealed currency transactions related to “anomalous” digital assets worth around $3.4 billion.

Similarly, the FIU has identified and taken regulatory action against 16 unregistered foreign digital asset exchanges, including Poloniex, KuCoin and Phemex, operating in the country earlier this month.

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