South Korean regulators fine Bithumb $24.5M after uncovering violations

Crypto exchange Bithumb will have to pay a fine of 36.8 billion won, about $24.5 million, after it was found to be in violation of South Korea’s Anti-Money Laundering rules.

According to a local media report, South Korea’s Financial Intelligence Unit under the Financial Services Commission identified about 6.65 million violations during an AML inspection where the exchange failed to properly carry out customer identity verification, transaction monitoring, and record-keeping requirements. 

Bithumb facilitated 45,772 crypto transfers involving 18 unregistered overseas virtual asset service providers in violation of the country’s AML framework.

Regulators decided on the penalties following a sanctions deliberation committee meeting that reviewed the exchange’s compliance with the Act on Reporting and Use of Specific Financial Transaction Information.

Bithumb has also been banned from processing external crypto transfers for new customers for six months, from March 27 to Sep. 26.

Existing customers, however, will be able to continue trading and using external transfers, while new customers can still buy or sell crypto and deposit or withdraw Korean won through the platform.

The penalties follow repeated warnings from the Financial Intelligence Unit, which had been urging the exchange to suspend all activity involving unregistered overseas crypto firms. Bithumb reportedly failed to implement the necessary blocking measures despite those instructions.

The latest penalty marks the largest fine ever imposed on a South Korean crypto exchange among several platforms that regulators have sanctioned for AML violations.

Last year, Upbit, one of South Korea’s largest crypto exchanges, received a three-month restriction on crypto deposits and withdrawals for new users over dealings with unregistered VASPs, alongside a 35.2 billion won penalty.

Bithumb is also navigating another probe by the Financial Supervisory Service over its operational mistake in which it accidentally credited users with an enormous amount of Bitcoin.

On Feb. 6, the exchange inadvertently distributed 620,000 Bitcoin worth roughly $40 billion to $44 billion at the time after an employee mistakenly entered payout amounts in BTC instead of Korean won during a promotional event.

FSS Governor Lee Chan Jin said regulators would look into how an exchange with far fewer actual reserves was able to record and distribute such large phantom Bitcoin balances within minutes, raising questions about internal controls and electronic ledger systems at the platform.