Upbit’s genitor company, Dunamu, has reportedly filed a suit against South Korea’s Financial Intelligence Unit (FIU) — a part nether the country’s apical marketplace regulator, the Financial Services Unit (FSC) — challenging its imposed sanctions.
Dunamu told the state-funded Yonhap News Agency connected Feb. 28 that it had submitted a suit to the Seoul Administrative Court connected Feb. 27 seeking to overturn the FIU’s partial concern suspension order. The institution besides applied for an injunction to halt the enforcement of the sanctions.
The suit follows the FIU’s partial suspension of Upbit’s operations, which restricts the speech from processing outer crypto transactions for caller customers. Services for existing customers stay unaffected.
In summation to the suspension, the FIU besides imposed disciplinary measures against Upbit and its executives for violating section regulations. A full of 9 executives, including the CEO, faced disciplinary actions.
Related: South Korea suspends downloads of DeepSeek implicit idiosyncratic information concerns
While the CEO received a ceremonial reprimand, the company’s compliance serviceman became the archetypal compliance serviceman astatine a South Korean crypto speech to beryllium dismissed by regulators.
How Upbit’s monopoly suspicions led to a partial concern ban
Founded successful 2017, Upbit is South Korea’s largest cryptocurrency exchange. In October 2024, during a parliamentary audit, the FSC faced scrutiny implicit its plans to investigate imaginable anti-monopoly violations by Upbit.
South Korean lawmaker blames FSC for playing favorites with Upbit successful October’s authorities audit. Source: National Assembly
The FIU announced successful November that it had identified astatine slightest 500,000 violations related to Know Your Customer (KYC) compliance astatine Upbit. This was followed by a business suspension notice successful January 2025.
Related: South Korea to let institutions to merchantability crypto donations successful 2025
Upbit’s alleged KYC violations and suspicious transactions
The FIU accused Upbit of facilitating astir 45,000 transactions with unregistered overseas crypto exchanges, which it claims is simply a usurpation of the Act connected Reporting and Using Specified Financial Transaction Information.
Regulators besides identified superior deficiencies successful Upbit’s lawsuit verification processes, specified arsenic accepting photocopied ID cards alternatively of originals and approving submissions with cardinal recognition details obscured.
In cases wherever customers submitted driving licenses for verification, the FIU recovered astir 190,000 instances wherever checks were conducted solely based connected idiosyncratic accusation without verifying the authenticity of the paper utilizing the encrypted serial fig recovered connected South Korean driving licenses. During lawsuit re-verification, the probe identified implicit 9 cardinal cases wherever nary authoritative recognition documents were collected.
During a trial of Upbit’s lawsuit verification system, a subcontractor handling Dunamu’s KYC operations hand-drew an ID paper arsenic portion of the test. The strategy verified it arsenic a morganatic ID. However, since this was conducted for strategy investigating purposes, the FIU did not classify it arsenic a regulatory violation.
A drafting passes Upbit’s verification system. Source: Financial Intelligence Unit
Responding to the restriction, Upbit said successful a connection that it has reviewed the indispensable improvements and has completed the indispensable corrective measures.
“However, we judge that definite circumstances and details regarding the reasons for immoderate of the sanctions and their severity were not afloat considered. Therefore, we volition faithfully contiguous these points done the procedures stipulated by the applicable regulations,” Upbit said.
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