South Korean Court Overturns Upbit AML Suspension

The decision limits the regulator’s ability to enforce sanctions where standards are not clearly defined. Separately, Bithumb  launched legal action to recover a small portion of Bitcoin still unreturned after a February payout error that mistakenly distributed 620,000 BTC. While most funds were recovered or covered by the exchange, some users have refused to return the remaining assets.

Court Cancels Upbit Ban

A South Korean court has ruled in favor of Dunamu, the operator of the Upbit cryptocurrency exchange, and overturned a three-month partial business suspension that was imposed by the country’s Financial Intelligence Unit (FIU). 

The case centers on sanctions imposed by the FIU in February of 2025, after an on-site inspection of Dunamu’s operations. The regulator alleged that the company facilitated transactions involving unregistered overseas virtual asset service providers (VASPs) and failed to adequately comply with customer due diligence and Know Your Customer (KYC) requirements. As a result, the FIU ordered a partial suspension of Dunamu’s business, specifically restricting new users on Upbit from transferring digital assets for a three-month period.

However, the Seoul Administrative Court found that the regulatory framework underpinning the FIU’s enforcement action lacked sufficient clarity. While the court acknowledged that clear rules exist for transactions exceeding 1 million won (approximately $675), it concluded that guidelines governing smaller transactions were not clearly defined. This lack of specificity weakened the legal basis for the FIU’s sanction.

In its ruling, the court also addressed the regulator’s claim that Dunamu failed to implement adequate AML measures. It determined that the FIU did not provide clear or detailed guidance on what compliance actions were required in practice. 

Consequently, the court found that Dunamu took its own measures, and even if those measures were later deemed insufficient, there was no clear evidence of intent or gross negligence. This undermined the justification for imposing such a penalty.

FIU sanctions disclosure against Dunamu

The ruling effectively limits the FIU’s ability to enforce major AML sanctions in cases where compliance standards are not explicitly defined. It also brings an end to a legal dispute that began shortly after the sanction was announced. Dunamu filed a lawsuit and requested an injunction on Feb. 28, 2025, just days after the penalty was issued. The court granted that injunction on March 27, which allowed Upbit to continue onboarding new users while the case was under review.

Bithumb Files Legal Action Over Bitcoin Payout Mistake

Meanwhile, South Korean cryptocurrency exchange Bithumb initiated legal proceedings to recover a small portion of Bitcoin that is still unreturned after a major payout error earlier this year. 

The exchange is seeking a provisional attachment order, which is a legal mechanism that allows courts to freeze assets before a civil case is finalized, targeting users who have not yet returned mistakenly received funds. The development was reported by Chosun Biz and is the latest step in Bithumb’s attempts to resolve the aftermath of the incident.

The error happened on Feb. 6, when Bithumb intended to distribute 620,000 Korean won (approximately $420) to 249 participants as part of a promotional event. Due to an input mistake, the system instead distributed 620,000 Bitcoin, which at the time briefly equated to around 62 trillion won, or approximately $42 billion. Although the exchange acted quickly and reversed the transactions within minutes, a portion of the funds had already been transferred or sold by recipients.

Bithumb stated that it successfully recovered 99.7% of the mistakenly distributed assets on the same day. The remaining 0.3%, equivalent to 1,788 Bitcoin that had already been liquidated, was covered using the company’s own reserves to mitigate the impact. 

Since then, the exchange continued efforts to reclaim the outstanding funds by contacting users individually. While most complied, a small number of recipients refused to return the remaining Bitcoin by arguing that they should not be held responsible for an error made by the exchange.

Legal experts say that such arguments are unlikely to succeed in court. Under South Korean law, assets received in error are generally classified as unjust enrichment, which means that recipients are legally obligated to return them regardless of fault. As a result, those who continue to withhold the funds may face unfavorable legal outcomes if the case proceeds.