Upbit operator sues South Korea’s Financial Intelligence Unit over sanctions

Upbit’s parent company, Dunamu, is suing South Korea’s Financial Intelligence Unit (FIU) over new sanctions, hoping to overturn a 3-month ban on new customer transactions. 

The FIU of South Korea issued Upbit with a temporary notice of suspension because the company failed to prevent transactions through unreported virtual asset operators. They also took action against the executives at Dunamu, Upbit’s parent company, including the CEO and compliance officer. In response, Dunamu filed a lawsuit to overturn these sanctions.

Dunamu challenges FIU’s business suspension order

The Virtual Asset Inspection Department carried out an on-site audit of Dunamu from August to October 2024 and discovered about  45,000 transactions with anonymous foreign crypto exchanges. The auditors also uncovered various issues with the system’s verification process.

For example, the system would accept copies of identification documents like driving licenses instead of the originals and approve submissions without key details. FIU also found evidence of improper verification of driving licenses, indicating a fatal system flaw, thus issuing the notice.

Upbit responded by claiming that the circumstances and details surrounding the investigation and sanctions and their severity were understated. This, to them, was enough reason to challenge the suspension through the court.

FIU sanctions could strengthen Upbit’s market dominance

According to critics, FIU’s sanctions might help boost Upbit’s dominance in the market rather than demolish it because the sanctions won’t stop the company from getting new customers or force existing ones out.

This doesn’t mean Upbit is in the clear though, because the legal battle with FIU could affect its relationships with banking partners. Upbit would struggle to negotiate expired contracts due to the rising tension created between its confrontation with the law

If stricter regulations are imposed along with these sanctions, it could stifle the innovative potential of cryptocurrency trading and force exchanges to seek other jurisdictions with more favorable laws.