Upbit Sues South Korean Regulator Over Business Suspension

Dunamu, the parent company of South Korea’s largest cryptocurrency exchange, Upbit, filed a lawsuit against the country’s Financial Intelligence Unit (FIU) over sanctions imposed on the platform.

Dunamu told Yonhap News Agency that it submitted the lawsuit to the Seoul Administrative Court a day earlier, seeking to overturn the FIU’s partial business suspension order. The company also filed for an injunction to halt the enforcement of the restrictions.

The FIU’s sanctions prevent Upbit from processing external crypto transactions for new customers, though existing users remain unaffected. Along with the restrictions, regulators also took disciplinary action against nine executives, including Upbit’s CEO, who received a formal reprimand. The exchange’s compliance officer became the first in South Korea’s crypto industry to be dismissed by regulators.

Monopoly concerns and compliance failures

Upbit also faced increasing scrutiny over its market dominance. During a parliamentary audit in October 2024, lawmakers raised concerns about anti-monopoly violations, prompting the Financial Services Commission (FSC) to launch an investigation.

The FIU later accused Upbit of violating Know Your Customer (KYC) regulations, identifying at least 500,000 compliance breaches. It also found that the exchange handled around 45,000 transactions with unregistered foreign crypto exchanges, which officials claim violated the Act on Reporting and Using Specified Financial Transaction Information.

Regulators flagged major lapses in Upbit’s verification process, including accepting photocopied ID cards instead of originals and approving submissions with obscured details. In nearly 190,000 cases, the system verified driving licenses without checking encrypted serial numbers, and during re-verifications, over 9 million instances lacked proper documentation.

A particularly alarming discovery was a test in which a subcontractor submitted a hand-drawn ID card as part of system testing. Upbit’s verification system approved it as legitimate. While this test did not count as an official violation, it highlighted flaws in the platform’s security measures.

In response, Upbit stated that it has already reviewed and implemented necessary compliance improvements. However, it argued that the sanctions were overly severe and did not fully consider all circumstances.

“We believe that certain circumstances and details regarding the reasons for some of the sanctions and their severity were not fully considered. Therefore, we will faithfully present these points through the procedures stipulated by the relevant regulations,” the company said.