Prosecutors in South Korea have arrested three people in an investigation into a $3.4 billion foreign exchange transaction that may be linked to illegal cryptocurrency trading.
As reported by Bloomberg News on Thursday (August 11), the trio were arrested on charges involving the establishment of paper companies and unregistered crypto trading.
The Daegu District Attorney’s Office told Bloomberg that the suspects are facing additional charges related to providing false information to banks and large amounts of foreign currency.
According to Bloomberg, the arrested individuals are linked to a firm that sent an estimated 400 billion won ($307 million) overseas from a branch of Seoul’s Wori Bank in exchange for arbitrage profits.
The country’s Financial Supervisory Service said that between May and June 2022, up to 1.6 trillion in unusual transactions were carried out at five branches of Wori Bank.
Similar transactions worth 2.5 trillion won were detected at 11 branches of Shinhan Bank between February 2021 and July 2022, the regulator said.
Read more: South Korean Crypto ‘Kimchi Premium’ Suspected of $3.4B FX Investigation
PYMNTS reported last month that when the FSS first unveiled its investigation, the probe will focus on what is known as Kimchi Premium.
Here’s how it works: Because it’s hard to transfer large amounts of money in and out of Korea from overseas, the value of digital tokens is very high – in some cases 20% higher on Korean exchanges. , due to the high popularity of crypto in that country.
This means that anyone who buys crypto abroad and sells it on Korean exchanges can make a tidy sum. Banks have strict reporting rules on certain amounts for any foreign exchange transaction, so the problem is getting those profits out of the country.
Banks are unlikely to approve these transfers, especially with recent moves by the Korean government to crack down on money laundering, tax evasion and price gouging, as well as cutting off the flow of money out of the country.
It would have been difficult to smuggle billions of dollars out of the country – if it originated from crypto trading – without falsely reporting its presence to banks.