930 Billion Won Currency Exchange Scam Targeting 'Kimchi Premium'... Branch Manager of Commercial Bank Also Involved

Prosecutors First Detect Illegal Foreign Currency Remittance of Kimchi Premium... Eight Members Indicted
Virtual Asset Transfers from Japan and China... Sold on Domestic Exchanges for Price Arbitrage

Structure of the remittance scheme targeting the 'Kimchi Premium'./Provided by Daegu District Prosecutors' Office

[Asia Economy Reporter Heo Kyung-jun] A group involved in illegal foreign currency remittance amounting to about 930 billion KRW through a method exploiting the so-called ‘Kimchi Premium’ has been brought to trial. This case marks the first time that a criminal structure was uncovered in which a group linked to Japanese and Chinese factions, taking advantage of the Kimchi Premium?where foreign prices are higher than domestic prices?systematically dumped large amounts of virtual assets on Korean exchanges and illegally transferred the profits overseas.

The Daegu District Prosecutors’ Office Anti-Corruption Investigation Division (Chief Prosecutor Lee Il-gyu) announced on the 6th that it had arrested and indicted eight people, including former Woori Bank branch manager Mr. A, on charges of violating the Foreign Exchange Transactions Act, and indicted one person without detention. Arrest warrants have been issued for the remaining eight accomplices, and international cooperation investigations are underway.

They are accused of selling virtual assets sent from Japan and China on Korean exchanges and illegally remitting the proceeds to Japan, China, Hong Kong, and other locations.

Their crimes are divided between Japan and China. Four people, including Mr. B, traded virtual assets worth about 340 billion KRW sent by accomplices in Japan from September last year to June this year. Despite not importing gold or semiconductor chips, they established shell companies and submitted false documents to banks, pretending to have imported gold, thereby deceiving the banks into believing the virtual asset trading proceeds were legitimate import payments. They remitted foreign currency worth about 495.7 billion KRW in 304 transactions.

Four others, including Mr. C, sold virtual assets worth about 350 billion KRW transferred from China. From June last year to June this year, they fabricated documents to appear as if they imported electronic components and remitted foreign currency worth about 439.1 billion KRW in 281 transactions to China, Hong Kong, and other places. The total amount illegally remitted overseas by selling foreign virtual assets domestically reached 934.8 billion KRW.

The prosecution also confirmed the involvement of a commercial bank branch manager in their crimes. Mr. A used false documents to remit foreign currency worth about 16.3 billion KRW in 13 transactions from May to June this year, aiding unreported capital transactions. In total, he remitted about 402.3 billion KRW in 244 transactions and received approximately 25 million KRW in cash and gift certificates as compensation. The prosecution also charged Mr. A with obstructing the Bank of Korea’s monitoring and reporting of foreign currency inflows and outflows.

Mr. A arbitrarily excluded ‘Suspicious Transaction Reports (STR Alerts)’ related to foreign exchange remittance transactions from being reported to the head office and notified accomplices of this fact, actively participating in the crime by informing them how to evade virtual asset regulations.

When accomplices in Japan and China transferred virtual assets to nominee account electronic wallets, the group sold them on Korean exchanges, laundered the proceeds through nominee accounts, and then remitted the funds to multiple paper company accounts established or secured in advance for overseas remittance. They submitted false supporting documents such as invoices arbitrarily created by them to banks, pretending that companies were remitting import payments, thereby disguising the transfers as legitimate overseas remittances.

Within just over a year, the group earned a total profit of 27 billion KRW, remitting 22.3 billion KRW to accomplices in Japan and directly acquiring about 4.7 billion KRW in profits. They used the illegally obtained criminal proceeds to lead a luxurious lifestyle, purchasing imported cars, luxury goods, high-priced real estate, and memberships at upscale resorts. The prosecution has taken measures to confiscate and preserve their criminal proceeds.

A prosecution official stated, "This investigation revealed that bank employees at commercial banks illegally remitted thousands of billions of KRW in foreign currency over more than a year without any intervention," adding, "A thorough inspection is needed to ensure that foreign currency remittance systems at commercial banks are properly operated."

This content was produced with the assistance of AI translation services.