First Arrests Occur in S. Korea’s Key Crypto-Related Investigation

As the nation’s embrace of cryptocurrencies gets hampered by price collapses, officials are looking into $3.4 billion in foreign exchange transactions.

South Korean prosecutors made their first arrests in a probe of $3.4 billion worth of foreign-exchange transactions for possible links to illegal cryptocurrency-related activities. Three people were held on allegations including setting up paper companies and operating a cryptocurrency trading business without registration, the Daegu District Prosecutors’ Office said in a text message on Thursday.

According to the office, the additional charges were related to substantial foreign currency transfers abroad and the submission of false data to banks. According to the Chosun Ilbo newspaper, the individuals detained are connected to a company that used a Woori Bank branch in Seoul to send 400 billion won ($307 million) worth of money abroad to make arbitrage profits.

The prosecutor’s office omitted to provide specific numbers. Woori Bank declined to comment because it was unaware of the specifics of the ongoing inquiry.

According to South Korea’s Financial Supervisory Service, five Woori Bank branches saw unusual transactions totaling 1.6 trillion won between May 2021 and June 2022. The bank reported that between February 2021 and July 2022, similar transactions totaling 2.5 trillion won were found at 11 Shinhan Bank branches.

Last month, neither bank would comment on the investigation being conducted by the supervisory service. The fourth-largest economy in Asia once stood out because digital tokens were so widely used there.

However, the $40 billion collapse of South Korean businessman Do Kwon’s Terraform Labs ecosystem came with a serious trust setback. The TerraUSD stablecoin failed to hold together after the implosion sparked a global crypto crash.

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