South Korea Identifies $7.2B Drained Though Crypto Exchanges

South Korea’s financial watchdog, the Financial Supervisory Service, has found that, since June 2022, $7.2 billion has been drained through “abnormal” foreign exchange transactions, most of which were transferred through cryptocurrency exchanges.

According to a recent Bloomberg report, transfers from Hana Bank, Kookmin Bank, Nonghyup Bank, Shinhan Bank, Woori Bank and seven other banks in the country were investigated. 

Local media reports further state that South Korean authorities raided the Seoul-based Woori Bank in connection with the investigation. 

The investigation uncovered a suspicious foreign exchange transaction that was made through a commercial bank. It is currently presumed that the crime was aimed at the ‘kimchi premium’, which alludes to the domestic virtual currency market being more expensive than overseas.

The Daegu District Prosecutor’s Office’s Anti-Corruption Investigation Department stated that its prosecutors were executing a search and seizure warrant for the Woori Bank headquarters and investigating one of its employees, who is accused of being involved in illegal foreign exchange remittance.

Bloomberg had previously reported that South Korea was investigating Woori and Shinhan for the overseas transfer of $3.4 billion worth of funds.

The South Korean bureau’s probe is expected to conclude by the end of October. 

Further Findings of The Prosecution

It was found that the majority of the funds were transferred to Hong Kong, and that 82% of the transfers were made in U.S. dollars.

The Financial Supervisory Service also identified an additional $680 million worth of “abnormal” transfers. Local reports also established that authorities seized 259.8 billion won ($184.4 million). 

The prosecutors had previously established the existance of several phantom corporations conducting virtual asset trading, which went unreported, while submitting false evidence to a bank, and remittances of 400 billion won in foreign currency abroad. Three officials were investigated and arrested in connection with the phantom corporations.

On the Flipside

  • South Korea has been pushing for increased crypto adoption, despite the prevalence of illegal crypto activity. Recently, Binance signed an Memorandum of Understanding (MoU) with the city of Busan in South Korea to boost adoption.

Why You Should Care

South Korea has been cracking down on illegal crypto activity and intends to expedite its new crypto rules, with thirteen digital asset-related proposals in the pipeline. The South Korean government has also issued an arrest warrant for Terra Co-Founder Do Kwon, following this year’s collapse of the Terra (LUNA) ecosystem.

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South Korea’s financial watchdog, the Financial Supervisory Service, has found that, since June 2022, $7.2 billion has been drained through “abnormal” foreign exchange transactions, most of which were transferred through cryptocurrency exchanges. According to a recent Bloomberg report, transfers from Hana Bank, Kookmin Bank, Nonghyup Bank, Shinhan Bank, Woori...