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The Digital Asset Exchange Alliance (DAXA) has identified four overseas virtual asset exchanges that conducted illegal business targeting South Korean investors without registering with financial authorities, and referred them to police for investigation. These exchanges were found to have recruited investors through Korean-language services, Korean won price displays, and reward centers offering compensation. Under the Special Financial Transactions Act, unregistered operations can carry penalties of up to five years in prison or fines of up to 50 million won (approximately $37,000). DAXA previously referred 12 illegal over-the-counter exchanges and other entities for investigation in June and plans to continue monitoring.
Key Elements
Four overseas virtual asset exchanges that continued operating without registering with South Korean financial authorities while targeting South Korean investors are now under police investigation. The Digital Asset Exchange Alliance (DAXA) announced on the 1st that it had detected evidence of illegal activity by these exchanges and referred them to police for investigation on the 31st of last month.
This action is aimed at eradicating illegal business operations that fail to fulfill the Virtual Asset Service Provider (VASP) registration obligation under Article 7 of the Act on Reporting and Using Specified Financial Transaction Information (the Special Financial Transactions Act). Under Article 17 of the current law, operating without formal registration with the Financial Intelligence Unit (FIU) under the South Korean Financial Services Commission can result in imprisonment of up to five years or fines of up to 50 million won (approximately $37,000).
DAXA’s own investigation of the exchanges’ websites and mobile applications revealed that they had been actively recruiting investors while evading oversight by South Korean financial authorities.
Representative violations included offering official Korean-language services on their websites and mobile apps, and displaying transaction prices converted to Korean won (KRW). Furthermore, they operated separate “reward centers” that paid compensation in Tether (USDT) or proprietary points tied to logins, deposits, and trading volume—a strategy clearly aimed at South Korean investors.
Unregistered overseas exchanges fall outside the scope of South Korean financial authorities’ management and supervision, leaving their anti-money laundering (AML) systems and user protection mechanisms relatively weak. Experts note that if these exchanges experience unexpected withdrawal suspensions, unilateral service terminations, or large-scale hacks, investors would find it virtually impossible to obtain relief within South Korea’s legal framework.
Kim Jae-jin, DAXA Executive Vice Chairman, emphasized: “Even if servers or headquarters are located overseas, any operation targeting domestic users clearly falls under South Korea’s Special Financial Transactions Act compliance requirements. DAXA will continue to thoroughly prevent market disruption caused by illegal operators and take the lead in establishing a sound virtual asset trading order.”
This is the second referral for investigation this year. In June, DAXA, together with domestic Virtual Asset Service Providers (VASPs), conducted an “intensive investigation of illegal virtual asset handlers” and referred a total of 12 entities to police, including eight illegal over-the-counter exchanges and four unregistered overseas exchanges.
DAXA plans to continue operating its monitoring network against unregistered illegal business activities. As the integration of South Korea’s virtual asset market into the regulatory framework expands, the trend of intensifying enforcement against overseas exchanges operating in regulatory blind spots is expected to continue for the foreseeable future.
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Source: finance.biggo.com