[비즈한국] A lawsuit filed by Dunamu, which operates the cryptocurrency exchange Upbit, against the Financial Intelligence Unit (FIU) to cancel a partial business suspension has begun. In February, the FIU imposed heavy disciplinary actions on Dunamu, including a three-month business suspension and reprimands for executives and employees, due to violations of the Act on Reporting and Using Specified Financial Transaction Information (Special Financial Information Act). Dunamu, refusing to accept the decision, responded with a lawsuit. During the first hearing held on the 17th, both sides clashed with opposing arguments.
On the 17th, the Seoul Administrative Court held the first hearing for the lawsuit filed by Dunamu to cancel the FIU's partial business suspension order. The trial began with the court noting that "the arguments of the plaintiff (Dunamu) and the defendant (FIU) are vastly different." Dunamu's legal team argued that "the FIU's business suspension is excessive and a fatal measure for a financial firm," highlighting the intense friction between the two parties.
The core issues presented that day were whether Dunamu had acted with intent or gross negligence (worthy of a suspension) and whether it had taken necessary measures following the detected violations. Another key point is that the alleged violations were discovered in transactions of less than 1 million won with unregistered overseas virtual asset service providers. The "Travel Rule," which mandates the provision of sender and recipient information when virtual asset service providers transfer customer assets to other providers, applies only to transactions of 1 million won or more. For this reason, exchanges had not restricted deposits and withdrawals for transactions under 1 million won.
Dunamu claimed, "We conducted verification through blockchain transaction tracking firms and took necessary measures, such as complying with the regulatory guidelines of the Digital Asset eXchange Association (DAXA)." The FIU countered, "It is difficult to view those as complete measures. DAXA only has five domestic virtual asset exchanges as members, and even among them, the measures taken by each are inconsistent."
The FIU emphasized that penalizing transactions under 1 million won was an appropriate action. The FIU stated, "In the past, we imposed a business suspension on Delio for 171 transactions with four unregistered operators. Even though Dunamu was only investigated for transactions involving four virtual assets, including Bitcoin, over 40,000 violations were found." In September 2023, the virtual asset deposit service Delio was hit with a three-month business suspension and a fine of approximately 1.9 billion won by the FIU for transactions with unregistered overseas virtual asset operators.
With neither side narrowing their gap, the subsequent trial will proceed based on evidence of Dunamu's measures and responses to the FIU's questionnaire. The next hearing is scheduled for September 25 at 3:00 PM.
The legal battle between Dunamu and financial authorities began with the heavy disciplinary action by the FIU’s Virtual Asset Inspection Division. On February 25, the FIU announced that it had discovered violations of the Special Financial Information Act during an on-site anti-money laundering inspection of Dunamu conducted between August and October 2024. The FIU imposed a three-month partial business suspension on Dunamu, prohibiting the transfer (deposit/withdrawal) of virtual assets for new customers, issued a reprimand to former CEO Lee Seok-woo, and imposed personnel sanctions on nine employees, including the compliance officer.
There are four main violations of the Special Financial Information Act pointed out by the FIU. First is the violation of the obligation to prohibit transactions with unregistered virtual asset operators. The FIU stated that Dunamu facilitated 44,948 virtual asset transfer transactions with 19 unregistered overseas virtual asset operators.
Article 10-20 of the Enforcement Decree of the Special Financial Information Act prohibits conducting business with virtual asset operators that have not fulfilled their registration or change-filing obligations. The FIU claimed that it had requested Dunamu to cease transactions with unregistered overseas entities several times since 2022 by sending letters of cooperation, but Dunamu failed to comply.
The second violation involves the failure to perform customer identification and transaction restrictions. It was discovered that there were 34,477 cases where ID information could not be verified or where non-original (printed copies, photocopies, photos, etc.) IDs were accepted, and 5,785 cases where customer information with improperly entered detailed addresses was processed as complete. There were also 226,558 instances where transactions were permitted for users suspected of money laundering without conducting customer identification measures.
The third violation noted was that Upbit failed to report transactions of 15 users suspected of dealing in illegal assets to the FIU, and the fourth was the failure to conduct a money laundering risk assessment before launching new products such as non-fungible tokens (NFTs).
The FIU's suspension order drew significant market attention, as Upbit is a dominant operator with over a 70% share of the domestic virtual asset market. Dunamu immediately responded with legal action. It filed for an injunction to suspend the execution of the order at the Seoul Administrative Court on February 27, and the court granted it on March 26, preventing the immediate implementation of the business suspension.
The fact that the authorities flagged transactions under 1 million won also drew industry attention, as the outcome of Dunamu's case could lead to sanctions for other operators such as Bithumb, Coinone, Korbit, and Gopax. Indeed, once news of the Dunamu investigation broke, exchanges like Bithumb and Coinone began applying the Travel Rule to virtual asset transactions under 1 million won, restricting withdrawals to unverified wallets and unregistered exchanges.
Meanwhile, as the trial continues, former CEO Lee Seok-woo suddenly resigned, and Dunamu welcomed Oh Kyung-seok, CEO of Panco, as its new head on July 1. Former CEO Lee, who had received a reprimand, remains as a management advisor. The new CEO, Oh, begins his term with the heavy responsibility of overturning the financial authority's sanctions. Regarding the sanctions for violating the Special Financial Information Act, Dunamu stated, "We will faithfully explain our position during the upcoming trial process."