South Korea uncovers transnational crypto money laundering case: the regulatory crisis behind $100 million in fund flows

Recently, the Korean Customs Service handed over three Chinese nationals to the prosecution authorities. They are suspected of conducting large-scale fund transfers through illegal channels, amounting to approximately $107 million. This case once again exposes the loopholes in South Korea’s cryptocurrency regulation and the frequent flow of funds between Korean and overseas platforms.

Multi-layered Money Laundering Scheme by Chinese Criminal Groups

According to information disclosed by the Korean Customs Service, this international criminal organization planned a complex fund operation from September 2021 to June 2025. The involved personnel used unauthorized cryptocurrency trading platforms to transfer funds, disguising the source through domestic and international digital wallet accounts as well as local Korean bank accounts.

The organization’s most cunning aspect is disguising the purpose of the funds. They labeled these funds as legitimate expenses, such as claiming they were used to pay for plastic surgery for foreign clients or as educational expenses for Korean students studying abroad. Through this method, illegal funds successfully blended into normal commercial transactions, evading financial regulatory scrutiny.

How Cross-border Money Flows Evade Korean Regulations: From WeChat to Bank Accounts

To avoid financial monitoring, the criminals adopted a typical multi-country operation strategy. They first purchased cryptocurrencies in multiple countries, then transferred these digital assets to wallets set up in Korea, and exchanged them for Korean won cash. Finally, they layered transfers through multiple bank accounts opened in Korea, making the flow of funds difficult to trace.

The channels for receiving customer deposits are also highly covert. The Korean Customs Service pointed out that this gang used Chinese social payment apps WeChat and Alipay to receive funds from clients, making it harder for international law enforcement agencies to obtain transaction records and customer identity information.

Lagging Cryptocurrency Market Regulation in Korea Triggers Capital Outflows

The occurrence of this case is not accidental. South Korea’s financial regulators have faced long-standing difficulties in establishing a framework for the cryptocurrency market and have yet to complete relevant legislation and regulatory rules. In this regulatory vacuum, crypto assets have become the main investment product for Korean investors.

Due to the lack of clear regulatory policies and trading restrictions, many Korean investors are forced to store billions of dollars worth of crypto assets on overseas trading platforms. This not only facilitates illegal fund transfers in this case but also reflects systemic flaws in Korea’s regulatory framework.

Detailed Analysis of the 14.79 Billion KRW Criminal Operation

According to investigations by the Korean Customs Service, these three Chinese nationals carried out fund transfers through a series of carefully designed steps. After purchasing cryptocurrencies on the international market, they imported them into Korean digital wallet accounts, exchanged them for Korean won, and then conducted complex transfers through multiple domestic bank accounts.

Each step in this process was designed to obscure the source and destination of the funds, making it difficult for regulators to track the entire flow. The 14.79 billion KRW (about $107 million) was gradually “laundered” through these layered transfers, eventually integrating into normal economic activities.

Greater Challenges Facing Korea

This case highlights systemic issues in South Korea’s cryptocurrency regulation. When government agencies cannot provide a clear regulatory framework domestically, investors naturally seek platforms and tools overseas, and this capital outflow also provides cover for criminals. Korea urgently needs to improve its crypto market regulations and establish a more transparent and efficient regulatory system to prevent similar illegal fund flows within Korea from recurring.

This case also serves as a reminder to policymakers that timely formulation of clear cryptocurrency policies is not only crucial for market development but also vital for national financial security and the effectiveness of crime prevention.