According to a local report, the South Korean Financial Supervisory Service (FSS) has uncovered illegal international fund transfers of an additional $650 million linked to crypto exchanges.
In June, the FSS launched a probe into all local banks after it received reports of suspicious international transfers of large sums of money from two of South Korea’s largest commercial banks, Woori and Shinhan. At the time, the financial watchdog instructed the banks to conduct internal investigations and submit the results, after which it started its studies.
Per the report, the $680 million recently discovered to have been illegally transferred outside the country is the latest result of the FSS probe into the concerned local banks, bringing the total amount of allegedly illicit funds to $7.2 billion.
According to the FSS, most funds were first sent from cryptocurrency exchanges to local bank accounts before being transferred overseas.
Offenders Exploited Crypto Arbitrage Trading
The financial watchdog further added that the transactions are related to the country’s “Kimchi Premium” arbitrage service.
Arbitrage is an investment strategy in which an investor buys and sells an asset in different markets and takes advantage of the price differences in both markets to generate a profit.
The offenders exploited this form of trading by buying cryptocurrencies in foreign exchanges and then selling them through South Korean exchanges where the asset prices are higher, the FSS noted.
The regulatory body added that the profits generated by the offenders were transferred from South Korean crypto exchanges to local banks, who then sent the money to their counterparts registered overseas.
According to the FSS, some of the offenders, ranging from individuals such as goods brokers and cosmetics wholesale agents to companies such as travel agencies, established fake companies and unregistered business models to cover their tracks.
The most significant overseas transfers, mainly in US dollars, were to Hong Kong, Japan, and China. The report added that the FSS plans to end its inspection by next month and will punish offenders.
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