Bithumb faces fresh sanctions decisions after big win over South Korean regulators

The six-month partial business suspension imposed on Bithumb by South Korea’s Financial Intelligence Unit has been overturned by a South Korean court, according to local reports by Yonhap News. 

The court’s ruling is a major relief to Bithumb as it prepares for fresh headaches from separate allegations of massive anti-money laundering (AML) failures.

Also, South Korea’s Personal Information Protection Commission has opened an investigation into Upbit, Bithumb, and other platforms regarding the sharing of order books with overseas platforms.

Why was Bithumb penalized?

The Seoul Administrative Court’s 2nd Division accepted Bithumb’s request for an injunction, effectively pausing the six-month-long partial business suspension that was set to cripple the exchange’s ability to take on new customers. 

With the court’s decision, Bithumb can continue its normal business operations without disruption while the broader legal dispute plays out.

The Financial Intelligence Unit (FIU), the anti-money laundering body under the Financial Services Commission (FSC), hit Bithumb with a six-month partial suspension and a $24.6 million (36.8 billion won) fine back in March after approximately 6.65 million violations of the Specific Financial Information Act were discovered.

Investigators found that Bithumb failed to properly verify customer identities and did not block transactions with unregistered overseas crypto operators. The proposed suspension, which was scheduled to begin on March 27, would have blocked new customers from transferring crypto assets in or out of the platform. 

However, Bithumb filed an injunction days before, on March 23, freezing its suspension until after the court ruled. 

Regulatory penalties sweep South Korea 

Cryptopolitan reported earlier this month that the Seoul Administrative Court also ruled in favor of Dunamu (NASDAQ: DUNU), the operator of Upbit. The court canceled a three-month partial suspension and a 35.2 billion won fine on similar charges to Bithumb on the basis that Dunamu had taken reasonable compliance steps. The court also ruled that a small percentage of flagged transactions did not amount to intentional wrongdoing.

The FIU has since appealed that decision, moving the case to a second trial. Coinone has also received sanctions and is challenging them in court. 

Aside from the FIU penalty, Bithumb is facing a separate and potentially more damaging investigation tied to a February incident in which a staff member accidentally paid out 620,000 Bitcoins instead of 620,000 won during a promotional event. 

Cryptopolitan previously reported that “deficiencies in Bithumb’s internal control system” were found by the Financial Services Commission (FSC) during its inspection of the February incident.

The payout error also prompted the FSC to tighten the monitoring requirements for all major exchanges. Before the incident, three of South Korea’s five largest platforms reconciled their internal ledgers with actual crypto holdings only once every 24 hours, but the FSC now requires those checks every five minutes, with automatic trading halts triggered by large mismatches. Monthly audits have also replaced the previous quarterly schedule.

Any manual payouts now require third-party verification, and exchanges must appoint a Risk Management Officer and form a Risk Management Committee.