South Korea is investigating $3.1 billion in currency transactions linked to crypto
South Korean regulators are investigating “abnormal” currency transactions worth $3.1 billion at two of the country’s largest commercial banks for possible money laundering related to crypto investments.
Unusual foreign exchange transactions worth Won4.1tn ($3.1 billion) have taken place at two Korean banks – Woori Bank and Shinhan Bank – since February 2021, the Financial Supervisory Service said on Wednesday. Most of the transactions involved crypto exchanges and a local trading company, the FSS said.
After being informed of the irregular deals in June, the FSS has asked all Korean banks to conduct an internal review of all large foreign exchange transactions made between January 2021 and June 2022 for potential similar transactions and to submit the results by the end of this month.
The investigation highlights how global authorities are looking more closely at the ties between traditional financial firms and the crypto industry and are also stepping up enforcement activity in the digital asset sector.
Information related to other abnormal transactions found from the report will be shared with the country’s tax office and prosecution authority for further investigations.
“We will take strict action against the banks that have not complied with the foreign exchange rules or those that have violated the anti-money laundering regulations,” the FSS said in a statement.
Woori Bank said it would cooperate with the investigation. Shinhan Bank officials could not immediately be reached for comment.
The probe comes a week after prosecutors raided around 15 locations, including the country’s seven largest crypto exchanges, in their investigation into the $40 billion crash in May of stablecoin terra and its digital token counterpart luna.
Prosecutors are investigating allegations against Do Kwon and Daniel Shin, the co-founders of Terraform Labs, which backed terra and luna. Shin denied the allegations at the time, saying “there was no intention of deception as we only wanted to innovate the payment settlement system with blockchain technology”. Kwon did not respond to a request from the Financial Times for comment.
The investigation was sparked by two complaints filed earlier this year on behalf of 81 retail investors, who have accused the pair of fraud and breaches of financial regulations.
Prosecutors are also investigating Chai Corp, the digital payment settlement company run by Shin, which had used terra as a payment tool, and some venture capital groups that have invested in the terra project, according to state-run Yonhap News. Shin could not be reached for comment on the report.
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The authorities last month banned Terraform Labs’ employees from leaving the country. They have also subpoenaed former and current employees to determine “whether Kwon intentionally deceived investors with his flawed algorithmic coins,” according to prosecutors.
The investigation widens as South Korea’s new government comes under fire for potentially creating perverse incentives with the Won125tn debt relief plan for low-income earners. The plan includes a scheme to waive part of the interest payments of financially vulnerable young people who have suffered large losses from their stock and coin investments.
The Financial Services Commission estimates that about 48,000 people will benefit from the temporary arrangement, which will be implemented for one year from September, when up to 126.2 billion won will be settled with government funds. The plan has sparked complaints from local banks, which have been forced to roll over debts and cut their interest rates.
This story has been amended to correct the dollar-won exchange rate.
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