Cryptocurrencies in dollars and won: how monetary chaos in South Korea led to an increase in money laundering

South Korean customs authorities uncovered a large-scale cryptocurrency money laundering scheme that cost the country over $107 million. Three Chinese nationals were detained and handed over to prosecutors on suspicion of converting crypto assets through a complex network of unauthorized channels. The criminal group operated for nearly four years — from September 2021 to June 2025 — converting 148.9 billion won into various forms of assets and carefully covering their tracks.

This criminal case is not just a crime story. It highlights a critical vulnerability in South Korea’s financial oversight infrastructure, where the lack of a clear regulatory framework for the cryptocurrency market has turned the country into an ideal place for financial manipulations.

Money Laundering Mechanism: From Wallets to Bank Accounts

The detainees organized an operation demonstrating the increasing complexity of methods to combat financial monitoring. According to Seoul Customs Service, the criminals used a multi-layered system to transfer funds. First, they received deposits from clients via popular Chinese payment apps WeChat and Alipay. Then, the cryptocurrency was purchased on unidentified crypto exchanges in several countries.

A key element of the scheme is the use of digital wallets within South Korea. The criminals transferred assets specifically here, rather than converting directly into the local currency. This approach added an extra layer of concealment. Then, the funds were converted into Korean won through numerous domestic bank accounts. Authorities note that the group carefully distributed money across multiple banks to avoid triggering large transfer control systems.

To mask the sources of funds, laundered dollars and won were declared as legitimate expenses. The criminals declared the transfers as payments for cosmetic surgery for foreign nationals or expenses for studying abroad. Such expense categories are potentially less suspicious to financial oversight.

Why Cryptocurrency Chaos Led to Money Laundering

This case reveals a deep-rooted problem in South Korea’s cryptocurrency market. Due to the lack of a coordinated regulatory framework and restrictions on digital asset trading, local investors are forced to store large sums in cryptocurrencies on foreign platforms. According to recent data, the volume of cryptocurrencies held by South Koreans outside the country is estimated in the billions of dollars.

This situation creates an ideal environment for criminals. The loosely regulated crypto market means unauthorized crypto exchanges can operate in the shadows. The absence of clear user identification rules (KYC) facilitates the creation of fake accounts. When crypto assets are outside the country and beyond direct regulatory control, moving money becomes almost untraceable.

Analysts note that such schemes will continue until South Korea completes the development of a comprehensive cryptocurrency regulation strategy. Cryptocurrency has become a primary investment asset for many South Koreans, but clear rules of the game are lacking.

Distributed Network Instead of a Central Node

The feature of the uncovered case is that the criminals did not use a single centralized account or wallet. Instead, they created a distributed architecture — multiple accounts in different banks, several digital wallets, multiple unauthorized platforms. This made it more difficult for regulatory authorities to operate.

Perhaps the most interesting aspect of this investigation is that the criminals chose South Korea precisely because of (or thanks to) its status as a developed crypto hub. This indicates that even in countries with a high level of financial literacy, the absence of clear regulation can become a vulnerability rather than an advantage.

According to experts, the revealed money laundering scheme totaling over $107 million and 148.9 billion won is just the tip of the iceberg. The identified group was likely one of many exploiting gaps in South Korea’s crypto regulation. This case should serve as a signal to accelerate the development of clear norms and standards for controlling the cryptocurrency market in the country.