Upbit\u2019s parent company, Dunamu, has reportedly filed a lawsuit against South Korea\u2019s Financial Intelligence Unit (FIU) \u2014 a division under the country\u2019s top market regulator, the Financial Services Unit (FSC) \u2014 challenging its imposed sanctions.<\/p>\n
Dunamu told<\/a> the state-funded Yonhap News Agency on Feb. 28 that it had submitted a lawsuit to the Seoul Administrative Court on Feb. 27 seeking to overturn the FIU\u2019s partial business suspension order. The company also applied for an injunction to halt the enforcement of the sanctions.<\/p>\n The lawsuit follows the FIU\u2019s partial suspension of Upbit\u2019s operations<\/a>, which restricts the exchange from processing external crypto transactions for new customers. Services for existing customers remain unaffected.<\/p>\n In addition to the suspension, the FIU also imposed disciplinary measures against Upbit and its executives for violating local regulations. A total of nine executives, including the CEO, faced disciplinary actions.<\/p>\n Related: <\/strong><\/em>South Korea suspends downloads of DeepSeek over user data concerns<\/strong><\/em><\/a><\/p>\n While the CEO received a formal reprimand, the company\u2019s compliance officer became the first compliance officer at a South Korean crypto exchange to be dismissed by regulators.<\/p>\n Founded in 2017, Upbit is South Korea\u2019s largest cryptocurrency exchange. In October 2024, during a parliamentary audit, the FSC faced scrutiny over its plans to investigate potential anti-monopoly violations by Upbit<\/a>.<\/p>\n South Korean lawmaker blames FSC for playing favorites with Upbit in October\u2019s government audit. Source: <\/em>National Assembly<\/em><\/a><\/p>\n<\/figcaption><\/figure>\n The FIU announced in November that it had identified at least 500,000 violations related to Know Your Customer (KYC) compliance<\/a> at Upbit. This was followed by a business suspension notice<\/a> in January 2025.<\/p>\n Related:\u00a0<\/strong><\/em>South Korea to allow institutions to sell crypto donations in 2025<\/strong><\/em><\/a><\/p>\n The FIU accused Upbit of facilitating approximately 45,000 transactions with unregistered foreign crypto exchanges, which it claims is a violation of the Act on Reporting and Using Specified Financial Transaction Information<\/a>.<\/p>\n Regulators also identified serious deficiencies in Upbit\u2019s customer verification processes, such as accepting photocopied ID cards instead of originals and approving submissions with key identification details obscured.<\/p>\n In cases where customers submitted driving licenses for verification, the FIU found nearly 190,000 instances where checks were conducted solely based on personal information without verifying the authenticity of the card using the encrypted serial number found on South Korean driving licenses. During customer re-verification, the probe identified over 9 million cases where no official identification documents were collected.<\/p>\n During a test of Upbit\u2019s customer verification system, a subcontractor handling Dunamu\u2019s KYC operations hand-drew an ID card as part of the test. The system verified it as a legitimate ID. However, since this was conducted for system testing purposes, the FIU did not classify it as a regulatory violation.<\/p>\n A drawing passes Upbit\u2019s verification system. Source: Financial Intelligence Unit<\/em><\/p>\n<\/figcaption><\/figure>\nHow Upbit\u2019s monopoly suspicions led to a partial business ban<\/strong><\/h2>\n
Upbit\u2019s alleged KYC violations and suspicious transactions<\/strong><\/h2>\n