South Korean courts convicted 94 of 95 defendants across 52 virtual asset foreign exchange violation cases from 2017 to 2026, with illegal transactions totaling approximately 3.1 trillion won. The cases involved unregistered foreign exchange operations using digital assets to facilitate cross-border currency exchanges, predominantly between China and Korea. The analysis preceded December 2026 implementation of Foreign Exchange Transaction Act amendments passed in June 2026.
Courts Impose Suspended Sentences in 48.9% of Virtual Asset Foreign Exchange Cases
Of the 94 defendants convicted of Foreign Exchange Transaction Act violations, 46 (48.9%) received suspended sentences, representing the most common penalty. Courts imposed fines on 28 defendants (29.7%) and imprisonment on 19 defendants (20.2%). One defendant received a suspended fine. Among imprisonment sentences, 12 defendants received 1-2 years, while 3 defendants each received 2-3 years and 3-4 years. The maximum sentence was 4 years imprisonment.
The 4-year sentence was handed down in a case (2022고단3979, Daegu District Court) involving virtual assets and false trade payments. Defendant A received 4 years imprisonment and forfeiture of 975.4 million won for exploiting kimchi premium arbitrage opportunities. The defendants transmitted virtual assets from overseas investors to domestic exchanges, sold them for Korean won, then disguised the proceeds as legitimate import payments or fees using false invoices and contracts before remitting funds abroad. The Supreme Court upheld the conviction in 2023.
Only one defendant received acquittal. In case 2019고단4672 (Seoul Central District Court), defendant B faced charges of conducting 1,839 exchange transactions worth approximately 17.9 billion won between May and September 2017. The court ruled in October 2019 that the transmission location of digital assets was unclear, evidence of exchange intent was insufficient, and the transactions could have been purely domestic. The prosecution's appeal was rejected, confirming the acquittal.
China-Korea Transactions Account for Largest Share of Illegal Exchange Cases
Cases involving Korean won and Chinese yuan exchanges using virtual assets as intermediaries accounted for 17 of 52 cases, representing the largest category. Vietnam illegal remittance cases ranked second with 13 cases. Seven cases each involved Philippines/casino connections and kimchi premium arbitrage schemes. Four cases involved gift cards, duty-free goods, or informal traders. Additional cases included XRP exchanges and small-scale overseas remittances.
The acquitted case involved alleged exchange operations between Korea and China using digital assets and gift cards. Defendant B faced charges of conducting approximately 17.9 billion won in exchanges through 1,839 transactions. Prosecutors alleged B received digital assets from Chinese clients, sold them on domestic exchanges, purchased gift cards with the proceeds, and delivered cards to designated recipients. Seoul Central District Court found insufficient evidence that transmissions originated overseas or that transactions served exchange purposes rather than domestic commerce.
Transaction Volumes Exceed 100 Billion Won in 48% of Cases
Excluding the acquittal, 50 cases with documented transaction amounts totaled approximately 3.1 trillion won. Cases involving 100 billion to 1 trillion won represented 24 cases (48%). Transactions between 10 billion and 100 billion won accounted for 18 cases (36%), while 7 cases (14%) exceeded 1 trillion won. Only one case involved amounts below 10 billion won.
The largest single case (2022고단3979, Daegu District Court) involved approximately 1.1859 trillion won in kimchi premium arbitrage combined with false trade payment remittances. The second-largest case (2023고단593, Bucheon Branch of Incheon District Court) involved Chinese exchange operator C, who conducted 36,568 transactions totaling approximately 308.8 billion won between 2016 and 2021 by transmitting digital assets from Chinese to Korean exchanges. C received a suspended sentence in May 2023, confirmed in July 2024 after appeal rejection. The court noted the large transaction volume but considered C's cooperation with investigators and potential lack of awareness regarding the illegality of using digital assets as intermediaries.
A 171.9 billion won Philippines-Korea exchange case (2020고단1095, Chuncheon District Court) involved five organized defendants. Account recruiter D received 2 years and 4 months imprisonment, confirmed after appeal rejection. Digital assets served as intermediaries to obtain Philippine pesos: Korean clients deposited won into D's accounts, D delivered cash to unnamed Chinese individuals who provided USB drives containing Bitcoin wallet information, accomplices entered the Philippines and sold Bitcoin for pesos, then deposited funds into D's local account for client distribution.
USDT Emerges as Preferred Tool in Recent Foreign Exchange Violations
Court judgments confirmed in the past two years increasingly feature USDT (Tether) as the primary exchange instrument. USDT is a stablecoin pegged to the US dollar. Two major cases involved USDT: a China-Korea exchange case (2024고단2768, Seoul Northern District Court) and a Philippines-Korea case (2025고합112, Daegu District Court).
In the China-Korea case, Chinese defendant F conducted 207.4 billion won in exchanges, with 100 billion won using USDT. F purchased USDT on Chinese exchanges, transferred it to acquaintances' wallets, sold 99.6 billion won worth on Korean exchanges, reconverted proceeds to yuan, and distributed approximately 99.5 billion won to Chinese residents in Korea. F received 1 year imprisonment and a 100 million won fine, confirmed in April 2025 after appeal rejection.
The Philippines-Korea case involved five defendants in organized conspiracy. Defendant G purchased USDT with won at Seoul exchange offices, recruited casino users and others needing Philippine pesos via SNS, received won from them, transmitted USDT to accomplices in the Philippines who converted it to pesos and delivered funds to won senders. During five months from February to July 2024, account deposits totaled approximately 48.7 billion won, with actual exchange volume of 3.4 billion won. G received a suspended sentence in April, confirmed without appeal.
USDT market capitalization grew 127% from approximately 126.08 trillion won in January 2021 to approximately 285.806 trillion won in July 2026 according to CoinMarketCap. Starting December 2023, five Korean won-market exchanges (Upbit, Bithumb, Coinone, Korbit, Gopax) began supporting USDT trading, increasing domestic activity. USDT's minimal price volatility makes it convenient for remittances.
The Korea Customs Service announced in April that it apprehended and referred without detention an exchange operator who illegally received used car export payments using USDT.
Foreign Exchange Transaction Act Amendments Take Effect December 2026
The National Assembly and government enacted Foreign Exchange Transaction Act amendments in response to continued virtual asset exchange crimes. The amendments were promulgated in June 2026 and take effect in December 2026. Key provisions require businesses conducting cross-border digital asset transfer operations to register with the Ministry of Economy and Finance. Authorities gain legal grounds to request data submissions from registered virtual asset transfer operators and conduct inspections. The amendments enable confiscation and forfeiture of digital assets used in Foreign Exchange Transaction Act violations.
Lawmaker Park Seong-hoon of the People Power Party introduced legislation in October of the previous year to add stablecoins as foreign payment instruments under the Foreign Exchange Transaction Act, but the bill remains pending in the National Assembly Strategy and Finance Committee. The committee's February review report expressed reservations, noting that designating stablecoins as payment instruments would create reporting obligations for transactions, potentially constraining domestic trading, and questioned whether preemptive regulation was appropriate before completion of second-stage legislation.
FAQ
What was the conviction rate in South Korean virtual asset foreign exchange cases from 2017 to 2026?
South Korean courts convicted 94 of 95 defendants across 52 virtual asset foreign exchange violation cases, resulting in a 99% conviction rate. Only one defendant received acquittal in a case where the court found insufficient evidence that digital asset transmissions originated overseas or served exchange purposes.
When do Foreign Exchange Transaction Act amendments addressing virtual assets take effect?
Foreign Exchange Transaction Act amendments were promulgated in June 2026 and take effect in December 2026. The amendments require businesses conducting cross-border digital asset transfers to register with the Ministry of Economy and Finance and grant authorities inspection powers and asset confiscation authority.
Why has USDT become prevalent in recent foreign exchange violation cases?
USDT emerged as a preferred exchange tool because its peg to the US dollar minimizes price volatility, making it convenient for remittances. USDT market capitalization grew 127% from approximately 126.08 trillion won in January 2021 to approximately 285.806 trillion won in July 2026, with five major Korean exchanges adding USDT trading support starting December 2023.
