- FIU penalized Upbit for accepting photocopied IDs and failing proper KYC verification.
- Upbit’s compliance officer was dismissed as part of FIU’s disciplinary actions.
- Dunamu seeks an injunction to prevent FIU from enforcing Upbit’s operational suspension.
South Korean cryptocurrency exchange operator Dunamu has filed a lawsuit against the Financial Intelligence Unit (FIU) to contest the limitations imposed on its Upbit platform. The complaint, which was filed on February 27, 2025, aims to reverse the FIU’s ruling that Upbit’s operations about Bitcoin transactions involving new clients are prohibited. Dunamu is further asking for an injunction to prevent the suspension order from going into effect.
Background of Sanctions Imposed on Upbit
The FIU’s sanctions against Upbit are based on the allegations that Upbit breached regulatory requirements, namely those related to Know Your Customer (KYC) processes. The regulator claims that Upbit enabled thousands of transactions using unregistered foreign cryptocurrency exchanges, violating the Act on Reporting and Using Specified Financial Transaction Information. Due to the FIU’s partial business suspension, Upbit cannot conduct external cryptocurrency transactions for new clients. Existing clients are still able to trade on the site, though.
Additionally, the FIU disciplined Upbit’s leaders, including the CEO, who was formally reprimanded. The company dismissed its compliance officer and punished other essential personnel through employee disciplinary procedures. South Korean authorities’ regulatory moves toward cryptocurrency platforms form part of their efforts to enforce stronger rules.
Allegations and Regulatory Concerns
The FIU’s investigation into Upbit revealed several KYC violations, including accepting photocopied identification documents and failing to properly authenticate customer IDs’ validity. In one example, the exchange conducted customer verifications without confirming the authenticity of driving licenses using encrypted serial numbers. Additionally, the FIU identified millions of cases where proper identification documents were not collected during re-verification processes.
Notwithstanding these charges, Dunamu has declared its intention to rectify the issues raised by the authorities. The company claims that it has already taken corrective steps to rectify the shortcomings in its verification system. Dunamu, however, also contends that the severity of the penalties does not adequately consider some situations, and it intends to make these arguments throughout the court case.
Dunamu Seeks Legal Recourse
Dunamu intends to do this to overturn the FIU’s suspension ruling and stop the fine from being applied. A major turning point has been reached with the company’s appeal to the Seoul Administrative Court, given the increased regulatory scrutiny of South Korean cryptocurrency exchanges. It will be fascinating to see how the court handles the regulatory problems and whether Upbit faces any more operational restrictions as the case develops.
Through this legal dispute, South Korea, the U.S. Securities and Exchange Commission (SEC), and other organizations have expanded their regulatory oversight of cryptocurrency. The court ruling will substantially affect South Korea’s policies regarding bitcoin exchange management.
