Virtual Asset 'Kimchi Premium' Exploitation Leads to 13 Trillion Won Overseas Outflow... Prosecution Indicts 49 People

The prosecution has uncovered and indicted a group that colluded with virtual asset speculators exploiting the 'Kimchi Premium' phenomenon to illegally transfer approximately 13 trillion won worth of virtual asset sale proceeds overseas by disguising them as false trade payments.

The 'Kimchi Premium' phenomenon refers to the situation over the past two years where the domestic price of virtual assets in South Korea has been significantly higher than overseas prices due to a surge in investment enthusiasm in the domestic virtual asset market.

Seoul Seocho-dong Supreme Prosecutors' Office and Seoul Central District Prosecutors' Office (center) building. Photo by Huh Younghan younghan@

On the 25th, the Supreme Prosecutors' Office announced that, following a focused crackdown since August last year in cooperation with the Korea Customs Service and the Financial Supervisory Service on virtual asset speculators exploiting the 'Kimchi Premium' phenomenon, they indicted a total of 49 individuals involved in illegal foreign currency outflows who, together with virtual asset speculators, transferred overseas virtual assets to domestic paper companies, sold them domestically, and then remitted approximately 13 trillion won in sale proceeds overseas disguised as false trade payments. Additionally, five individuals who fled abroad were placed on wanted status. Among the 49 indicted, 29 were prosecuted while in custody. Furthermore, seven financial institution employees who colluded with them to facilitate overseas remittances were also indicted.

The investigation was conducted simultaneously by the Seoul Central District Prosecutors' Office, Daegu District Prosecutors' Office, and Incheon District Prosecutors' Office. The Seoul Central District Prosecutors' Office indicted 20 individuals who illegally transferred about 4.3 trillion won overseas. The Daegu District Prosecutors' Office indicted 16 individuals who embezzled approximately 8.7 trillion won abroad. The Incheon District Prosecutors' Office investigated an illegal foreign currency outflow case involving about 13.2 billion won and indicted six individuals. The defendants face charges including violations of the Foreign Exchange Transactions Act, obstruction of business, and violations of the Act on Reporting and Using Specified Financial Transaction Information. Bank brokers were charged with bribery under the Act on the Aggravated Punishment of Specific Economic Crimes.

According to the prosecution, since the average 'Kimchi Premium' based on Bitcoin over about two years was approximately 3-5% (exceeding 20% at peak), the virtual asset speculators caught this time are estimated to have gained at least 390 billion won in illicit profits based on the total remittance amount of 13 trillion won.

A prosecution official stated, "The defendants involved in this case earned approximately 28.1 billion won in profits from domestic virtual asset sales and overseas remittances disguised as false trade payments," adding, "It was also revealed that financial institution employees, who should have prevented and supervised illegal foreign currency outflows, instead tolerated or actively assisted the offenders in exchange for cash, luxury goods, and golf entertainment. Seven financial institution employees were indicted (two detained)." The investigation found that these employees knowingly accepted cash and other benefits despite being aware that the submitted supporting documents were false, thereby playing a key role in perpetuating the large-scale illegal foreign currency outflows.

Mr. Pumo (52), a former branch manager of Bank A, is charged with aiding unreported capital transactions by remitting approximately 16.3 billion won overseas using false documents from May to June 2022 (violation of the Foreign Exchange Transactions Act). He is also accused of violating the Foreign Exchange Transactions Act by conducting unregistered foreign exchange business through collusion with foreign currency outflow offenders, remitting about 402.3 billion won overseas using false documents from October 2021 to June last year. Additionally, he faces charges of bribery under the Act on the Aggravated Punishment of Specific Economic Crimes for receiving 25 million won related to these foreign exchange remittance operations and leaking information about a prosecution account tracking warrant issued in May last year. Mr. Humo (42), a team leader at Securities Company B, is charged with obstruction of business for remitting approximately 5.7845 trillion won overseas using false documents from August 2019 to August last year. He is also accused of bribery under the Act on the Aggravated Punishment of Specific Economic Crimes for receiving luxury goods worth about 58 million won, including a luxury watch valued at approximately 30 million won and a luxury bag worth about 130 million won.

The prosecution applied joint liability provisions to two financial institution corporations, Bank A and Futures Company B, for gross negligence in managing and supervising foreign exchange transactions and indicted them together. The branch manager of Bank A illegally transferred about 418.6 billion won overseas. Despite the branch's foreign exchange transaction volume soaring unusually from 11.77 million USD in the first half of 2021 to 409 million USD in the second half, Bank A failed to properly inspect and supervise these transactions. Employees of Futures Company B illegally remitted about 7 trillion won overseas during derivative transactions. Due to Futures Company B's negligence in management and supervision, employees were unaware of foreign exchange transaction regulations, enabling illegal foreign currency outflow offenders to remit or receive approximately 7 trillion won in virtual asset funds overseas under the guise of derivative transaction funds.

Structure of Foreign Currency Outflow Case Using Kimchi Premium. [Provided by the Supreme Prosecutors' Office]

They first purchased virtual assets on overseas virtual asset exchanges, transferred them to domestic virtual asset exchanges, and sold them there. Then, they transferred the proceeds from the virtual asset sales to paper company accounts and remitted foreign currency overseas under the pretext of false trade payments. After deducting the Kimchi Premium profits, they repeatedly used the recovered funds to purchase virtual assets, thereby acquiring the Kimchi Premium.

In particular, they were found to have repeated these actions during periods when the Kimchi Premium was high. For example, if 10 billion won circulates 100 times, the overseas remittance scale reaches 1 trillion won. While virtual assets flowed into the country through these crimes, 13 trillion won in foreign currency was entirely transferred overseas disguised as trade payments, which had no connection to the domestic real economy and only enriched speculative forces, the prosecution explained. The defendants earned about 28.1 billion won in profits from domestic virtual asset sales and overseas remittances disguised as false trade payments, and the prosecution is currently proceeding with asset seizure and confiscation procedures regarding these criminal proceeds.

The prosecution plans to strictly respond to illegal foreign currency outflow crimes to prevent national wealth from leaking overseas due to virtual asset speculative trading and to protect honest virtual asset investors. They will also work with related agencies to devise improvement measures for the management and supervision of foreign exchange operations by financial institutions. A prosecution official said, "From the early stages of the investigation, we shared data and information with the Financial Supervisory Service and the Korea Customs Service, enabling us to swiftly uncover the full scope of the case through collaboration equivalent to a joint investigation." He added, "This investigation revealed structural problems in the foreign exchange system related to prepayment customs clearance and import payment, prompting discussions among administrative agencies and foreign exchange banks to improve the system." He further stated, "We will continue to cooperate closely with related agencies to strictly punish structural corruption in specialized fields that significantly impact the national economy, such as foreign exchange, and will relentlessly track and confiscate criminal proceeds."

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