Upbit’s parent company, Dunamu, has reportedly filed a lawsuit against South Korea’s Financial Intelligence Unit (FIU) — a division under the country’s top market regulator, the Financial Services Unit (FSC) — challenging its imposed sanctions.
Dunamu told the state-funded Yonhap News Agency on Feb. 28 that it had submitted a lawsuit to the Seoul Administrative Court on Feb. 27 seeking to overturn the FIU’s partial business suspension order. The company also applied for an injunction to halt the enforcement of the sanctions.
The lawsuit follows the FIU’s partial suspension of Upbit’s operations, which restricts the exchange from processing external crypto transactions for new customers. Services for existing customers remain unaffected.
In addition to the suspension, the FIU also imposed disciplinary measures against Upbit and its executives for violating local regulations. A total of nine executives, including the CEO, faced disciplinary actions.
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While the CEO received a formal reprimand, the company’s compliance officer became the first compliance officer at a South Korean crypto exchange to be dismissed by regulators.
How Upbit’s monopoly suspicions led to a partial business ban
Founded in 2017, Upbit is South Korea’s largest cryptocurrency exchange. In October 2024, during a parliamentary audit, the FSC faced scrutiny over its plans to investigate potential anti-monopoly violations by Upbit.
South Korean lawmaker blames FSC for playing favorites with Upbit in October’s government audit. Source: National Assembly
The FIU announced in November that it had identified at least 500,000 violations related to Know Your Customer (KYC) compliance at Upbit. This was followed by a business suspension notice in January 2025.
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Upbit’s alleged KYC violations and suspicious transactions
The FIU accused Upbit of facilitating approximately 45,000 transactions with unregistered foreign crypto exchanges, which it claims is a violation of the Act on Reporting and Using Specified Financial Transaction Information.
Regulators also identified serious deficiencies in Upbit’s customer verification processes, such as accepting photocopied ID cards instead of originals and approving submissions with key identification details obscured.
In cases where customers submitted driving licenses for verification, the FIU found nearly 190,000 instances where checks were conducted solely based on personal information without verifying the authenticity of the card using the encrypted serial number found on South Korean driving licenses. During customer re-verification, the probe identified over 9 million cases where no official identification documents were collected.
During a test of Upbit’s customer verification system, a subcontractor handling Dunamu’s KYC operations hand-drew an ID card as part of the test. The system verified it as a legitimate ID. However, since this was conducted for system testing purposes, the FIU did not classify it as a regulatory violation.
A drawing passes Upbit’s verification system. Source: Financial Intelligence Unit
Responding to the restriction, Upbit said in a statement that it has reviewed the necessary improvements and has completed the necessary corrective measures.
“However, we believe that certain circumstances and details regarding the reasons for some of the sanctions and their severity were not fully considered. Therefore, we will faithfully present these points through the procedures stipulated by the relevant regulations,” Upbit said.
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