Crypto Exchange Korbit Fined $1.90 Million By South Korean Regulators

Overview

South Korea’s Financial Intelligence Unit (FIU) has imposed a fine of approximately ₩2.73 billion, equivalent to around $1.90 million, on the cryptocurrency exchange Korbit. This action follows an inspection that revealed significant lapses in the exchange’s compliance with anti-money laundering (AML) and know your customer (KYC) regulations.

Regulatory Findings and Inspection Details

The fine was imposed after an on-site inspection conducted by the FIU, which took place from October 16 to 29, 2024. The inspection uncovered nearly 22,000 breaches of AML and KYC rules at Korbit. The FIU reported that the exchange failed to adequately verify customer identities and manage transactions properly. Specifically, it was noted that Korbit allowed some customers to engage in trading activities before completing full verification processes. Additionally, the exchange accepted unclear or incomplete identification documents in numerous instances.

Furthermore, the FIU identified 19 overseas transfers connected to three unregistered foreign virtual asset service providers. Such practices contravene South Korean law, which restricts these types of transactions. The inspection highlighted a lack of necessary risk assessments for certain services, including non-fungible token (NFT) activities, with a total of 655 cases where mandatory risk evaluations were not conducted.

As a result of the findings, corporate responsibility measures were enacted. The CEO of Korbit received a formal caution, and the compliance officer was reprimanded. Alongside the monetary penalty, the FIU issued an institutional warning to the exchange.

Transaction Failures and Enforcement Actions

The inspection report detailed instances where trading or withdrawals continued despite incomplete KYC processes. These lapses pose a higher risk of illicit funds being processed through the platform without timely detection. The FIU’s actions are part of a broader initiative by South Korean authorities to enhance oversight of cryptocurrency exchanges and align them with international AML standards.

Market sources have indicated that Korbit has been in discussions with Mirae Asset Group regarding a potential deal, with the exchange’s valuation estimated at around ₩140 billion, approximately $97–$98 million. This interest in Korbit persists despite the heightened regulatory scrutiny, indicating that traditional financial institutions remain interested in crypto assets despite the compliance challenges they present.

From Author

The regulatory actions against Korbit signal a significant shift in the South Korean cryptocurrency landscape. As authorities intensify their focus on compliance, exchanges will likely need to reassess their operational protocols. This case serves as a reminder of the importance of adhering to AML and KYC regulations, particularly as the crypto market continues to evolve.

Impact on the Crypto Market

• Increased regulatory scrutiny may lead to more rigorous compliance measures across cryptocurrency exchanges.
• Other exchanges could initiate internal reviews to address potential compliance shortcomings.
• The Korbit case may accelerate the adoption of advanced technologies and staffing changes aimed at enhancing compliance.
• Traditional finance’s interest in crypto remains, even as regulatory challenges mount, indicating a complex relationship between the sectors.
• The potential repercussions of this case could influence future regulatory actions and compliance strategies across the industry.