[Invest&Law] Reason for Not Guilty Verdict in Multi-Trillion Won Overseas Remittance Targeting 'Kimchi Premium'

Paper Company Trade Payment Concealment
Resold at High Prices on Domestic Exchanges
Court: "Actual Remitter Is the Bank"

A group indicted for allegedly remitting trillions of won in foreign currency overseas by exploiting the so-called ‘Kimchi Premium,’ where prices on Korean virtual asset exchanges are higher than those on overseas exchanges, was acquitted.

On the 6th, Judge Park Byung-gon of the Criminal Division 5 at the Seoul Central District Court acquitted 14 individuals, including Mr. A, who were indicted on charges of violating the Act on Reporting and Using Specified Financial Transaction Information (Specified Financial Information Act), obstruction of business, and violation of the Foreign Exchange Transactions Act (2022GoDan5940, etc.).

Mr. A and others were accused of remitting trillions of won overseas through multiple banks from 2021 to 2022. They disguised the transfers as payments for trade overseas to evade financial authorities’ scrutiny and were found to have operated paper companies disguised as trading firms to facilitate large remittances. Using the funds sent this way, they purchased virtual assets on overseas coin exchanges and then transferred them to domestic exchanges to sell at prices with the Kimchi Premium.

Seoul Central District Court, Seocho-gu, Seoul. Photo by Jinhyung Kang aymsdream@

The prosecution argued that they violated the Foreign Exchange Transactions Act by conducting foreign exchange business without registering with the government and obstructed banks’ foreign exchange remittance operations.

However, the court did not accept the prosecution’s claims.

Judge Park stated, “Mr. A and others only applied to the banks to remit funds, but the actual party executing the remittance was the bank,” and judged that “the act of delegating remittance processing is distinct from the remittance itself.”

He added, “Interpreting the delegation of remittance processing as part of the remittance act goes beyond the scope of a reasonable interpretation,” and “even if there is a need to regulate Mr. A and others’ actions as foreign exchange business, this should be addressed through legislation.”

Regarding the prosecution’s claim that Mr. A and others violated the Specified Financial Information Act by conducting virtual asset trading business without reporting to the Financial Intelligence Unit Director, Judge Park also rejected it, stating, “Mr. A and others were not ‘virtual asset service providers’ as defined in the Specified Financial Information Act but merely conducted large-scale, continuous, and repetitive virtual asset trading through virtual asset exchanges.”

Furthermore, while acknowledging that Mr. A and others submitted falsified supporting documents to banks when applying for foreign exchange remittance despite not actually importing goods, the court judged that the banks’ acceptance of such applications was ultimately due to insufficient scrutiny by bank employees. Therefore, the charge that Mr. A and others obstructed the banks’ foreign exchange remittance operations by deception was also acquitted.

Reporter Park Su-yeon, Legal Newspaper

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