According to a local news report, South Korean government authorities have arrested three people involved in an ongoing investigation of $3.4 billion worth of foreign exchange transactions for possible links to illegal crypto-related activities.
South Korean Prosecutors Arrest Three Men
The anti-corruption investigation department of the Daegu District Prosecutor’s Office disclosed that the three people were involved in fake data submissions to banks and substantial foreign currency transfers abroad.
In addition, the suspects allegedly operated an unregistered cryptocurrency exchange and a paper company without proper authorization from the authorities.
The arrested individuals were also linked to an Incheon-based remittance company dubbed Company A, which is used to process about 400 billion won ($307 million) worth of transactions from a branch of Woori Bank in Seoul.
Breach of Act of Financial Reporting Rules
Before the arrests, the authorities had subpoenaed the firm for more information and investigated multiple company executives, including Company A.
The report noted that the prosecutors sent three people, including a representative from Company A, to the Financial Supervisory Service and discovered the violation of the Act on the Reporting and Use of Specific Financial Transaction Information.
The three people were arrested on the charges of violating the Special Act and the Foreign Exchange Management Act.
Arbitrage Opportunities
South Korean authorities believe that one of the arrested people specifically targeted the remittance firm to benefit from its “Kimchi premium” service to make a profit.
Through the Kimchi premium, the suspect could sell the digital currency he bought with unknown Japanese funds overseas at a higher price using a South Korean currency exchange.
Authorities Probes $3.4bln Abnormal Transactions
The report noted that prosecutors started tracking the accounts after it was tipped off about dozens of “abnormal transactions” detected in Company A by the Financial Intelligence Unit (FIU).
According to the report, FIU detected the transactions used to pay for imported goods such as gold bars and semiconductor chips abroad and passed the information to the Daegu District Prosecutors.
In July, South Korea’s Financial Supervisory Service started looking into $3.4 billion worth of “abnormal” foreign exchange transactions in two of the biggest commercial banks in the country for possible crypto-related scams.
The agency noted that the unusual transactions, amassing 1.6 trillion won, approximately $1.3 billion, were conducted in five branches of Woori bank from May 3, 2021, to July 9, 2022.
Similar transactions also occurred in 11 branches of Shinhan Bank between February 23, 2021, and July 4, 2022.
