Upbit Battles FIU: Dunamu Launches Explosive Lawsuit Over Crypto Sanctions

1. Dunamu, Upbit’s parent company, is challenging FIU sanctions in court.
2. The dispute centers on a partial business suspension over alleged KYC violations.
3. Upbit claims to have made necessary improvements but questions the severity of the penalties.

Dunamu, the parent company of Upbit, has launched a legal battle against South Korea’s Financial Intelligence Unit (FIU) over sanctions that include a partial business suspension. The company has brought an action in front of the Seoul Administrative Court on February 27 to overturn the ruling by the FIU. It has also sought an injunction to temporarily suspend enforcement in the meanwhile.

The contention is over allegations that the company violated the Special Financial Information Act by dealing with nonregistered foreign virtual asset providers and failing to fulfill requirements to identify customers.

Following an on-site inspection between August and October 2024, the FIU reported more than 500,000 Know Your Customer (KYC) compliance violations. This led to regulatory action in January 2025, restricting Upbit from allowing new customers to transfer virtual assets for three months, from March 7 to June 6.

Upbit Questions Severity of Sanctions

Dunamu has objected to the FIU report, citing that certain factors weren’t correctly accounted for. One of its representatives described that while corrections have been implemented by Upbit following an investigation, it disagreed with certain aspects regarding sanctions.

The sanctions by the FIU included suspending the company by three months, warning CEO Lee Seok-woo, and discharging Upbit’s compliance officer.

Despite these sanctions, the company has assured present customers that they can continue to trade unrestricted. New customers have only temporary withdrawal limitations while deposits, exchanges, and trading remain unchanged.

Upbit Reaffirms Compliance Efforts

In response to the regulatory crackdown, Upbit released an announcement to apologize to clients about the uncertainty brought about by sanctions. The firm reaffirmed that it was taking steps to tighten compliance systems better and strengthen internal controls. “We have estimated the necessary adjustments and have executed the necessary steps,” the announcement detailed.

Upbit also indicated that the imposed restrictions could change depending on court rulings, suggesting that if the sanctions are overturned or modified, new customers could regain full access to its services. The company emphasized its role in stabilizing South Korea’s anti-money laundering framework and pledged to uphold strict compliance standards moving forward.

The ruling is a key development in South Korea’s crypto market because regulatory attention to exchanges is growing. How enforcement is carried forward in the growing market in digital assets is something this ruling has the potential to decide.

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