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Legal Risks of Crypto OTC Transactions, Money Laundering Allegations, and Accomplice Liability

Some individuals become involved in USDT (Tether) exchange transactions in Korea believing they are simply helping with a private crypto transfer or OTC deal, only to later find themselves under investigation for fraud, money laundering, or violations of Korean financial regulations.

In recent years, Korean investigative authorities have increasingly focused on crypto-based money laundering structures connected to voice phishing, investment scams, illegal gambling operations, and overseas criminal organizations. As a result, even participants who were not part of the original scam may become subject to criminal investigation if they are found to have handled, converted, or transferred suspicious funds.

This article explains the key Korean laws, court precedents, and investigative standards commonly applied in USDT exchange cases involving alleged accomplice liability or concealment of criminal proceeds.
 

Why USDT Is Frequently Used in Money Laundering Schemes

USDT (Tether) is a stablecoin pegged to the U.S. dollar and is widely used because of its relatively stable value and fast cross-border transfer capability.

However, these same characteristics also make USDT attractive to criminal organizations seeking to move or conceal illegally obtained funds.

In Korea, investigative authorities have recently uncovered multiple cases where proceeds from voice phishing or investment fraud were converted into USDT and transferred to overseas wallets or cash-out channels. In March 2026, for example, Seoul Jungnang Police announced the arrest of 19 individuals involved in laundering fraud proceeds through USDT conversion schemes linked to overseas criminal groups, with approximately KRW 6 billion in criminal assets seized.

Under Korea’s Act on Reporting and Use of Certain Financial Transaction Information (commonly referred to as the “Special Financial Transactions Act” or “Special Act”), anti-money laundering obligations primarily apply to registered Virtual Asset Service Providers (VASPs). As a result, OTC crypto transactions conducted privately between individuals often become a gray area where the participant’s knowledge and intent become the central legal issue.
 

Major Korean Laws That May Apply

1) Fraud Accomplice Liability Under the Korean Criminal Act

If a person is found to have participated in the movement, exchange, or delivery of funds obtained through fraud, Korean prosecutors may investigate whether that person acted as:

• a joint principal offender (co-principal), or
• an aider and abettor (accessory)

under Articles 30 and 32 of the Korean Criminal Act.

The key issue is whether the participant knowingly assisted the fraudulent scheme or merely engaged in what appeared to be an ordinary transaction.
 

2) Act on Regulation and Punishment of Criminal Proceeds Concealment

One of the most commonly applied statutes in these cases is Korea’s Act on Regulation and Punishment of Criminal Proceeds Concealment.

The law criminalizes conduct such as:

• disguising the acquisition or disposition of criminal proceeds,
• concealing the origin of criminal proceeds, or
• hiding or transferring criminal assets.

In practice, converting fraud proceeds into cryptocurrency, cashing out USDT, or transferring funds through third-party wallets may all be viewed by investigators as potential money laundering activity.

The central legal question is usually whether the person handling the transaction knew — or at least should have suspected — that the funds were connected to criminal activity.
 

3) Korean Special Financial Transactions Act (Crypto Business Registration Issues)

Individuals who repeatedly exchange USDT or conduct OTC crypto transactions for commission-based profit may also face allegations of operating an unregistered virtual asset business.

Korean authorities generally look at factors such as:

• repeated or continuous transactions,
• receipt of commissions or service fees,
• dealing with multiple counterparties, and
• operation resembling a commercial exchange service.

A one-time transaction between acquaintances is treated differently from ongoing exchange activity conducted for profit.
 

4) Foreign Exchange Transactions Act

In some cases, Korea’s Foreign Exchange Transactions Act may also become relevant.

This typically arises where funds are transferred internationally, including situations involving overseas wallets, offshore entities, or cross-border settlement structures.

If the transaction occurred solely between domestic parties using Korean won, investigators may focus more heavily on money laundering or crypto regulatory issues rather than foreign exchange violations. However, international transfer structures may trigger additional scrutiny.
 

The Most Important Legal Issue: “Willful Blindness” or Implied Criminal Intent

One of the most important legal concepts in these investigations is whether the participant had criminal intent — including so-called “willful blindness” or implied awareness.

The Korean Supreme Court has ruled as follows:
 

To punish a person for concealing criminal proceeds, it is sufficient that the person recognized the property as criminal proceeds in general terms; it is not necessary for the person to know the exact type or details of the underlying crime.
— Korean Supreme Court Decision 2006Do5288, Jan. 11, 2007

This means that even if someone claims:

• “I did not know it was voice phishing money,” or
• “I thought it was related to tax avoidance or gambling,”

criminal liability may still arise if the person recognized that the funds were likely illegal in some form.

Importantly, Korean courts may separately recognize liability for concealing criminal proceeds even where accomplice liability for the original fraud itself is disputed. The two offenses are legally distinct.
 

Factors Korean Investigators Commonly Use to Infer Criminal Awareness

Investigative authorities do not rely solely on direct admissions. Instead, they often infer intent based on the overall transaction structure.

Common factors include:
 

▪️Unofficial OTC Transaction Methods

Transactions conducted outside registered exchanges or through private channels are often viewed as higher-risk structures.

▪️Repeated Transactions

Repeated dealings using similar methods may be interpreted as evidence that the participant understood the suspicious nature of the activity.

This may also support allegations of operating an unregistered crypto business.

▪️Excessive Commissions or Fees

Receiving unusually high compensation compared to ordinary exchange fees may be treated as evidence of awareness of illegal risk.

▪️Lack of Identity Verification

Transactions involving anonymous parties, unverifiable identities, or disappearing counterparties may raise additional suspicion.

▪️Blockchain Transaction Analysis

Because cryptocurrency transfers are recorded on the blockchain, Korean authorities increasingly use blockchain forensic analysis to trace fund flows and identify links between victim funds and crypto wallets.

Where several of these factors appear together, prosecutors may argue that the participant at least “implicitly recognized” the illegal nature of the funds.
 

Defense Strategy: Explaining Why Criminal Awareness Did Not Exist

In these cases, simply stating “I did not know” is rarely enough.

Because Korean courts broadly recognize implied criminal intent, the defense must often demonstrate — through objective facts and evidence — why the person could not reasonably have recognized the funds as criminal proceeds.

Important factors may include:

• how the relationship with the counterparty developed,
• why the transaction appeared legitimate at the time,
• whether there were objective warning signs,
• how the transaction was explained to the participant, and
• whether statements remain consistent with blockchain records and messaging history.

Early-stage responses are particularly important because investigators often already possess substantial transaction data before conducting interviews.

An inconsistent or poorly prepared initial statement may later be used to strengthen suspicions.

In addition, allegations involving fraud accomplice liability, criminal proceeds concealment, crypto business registration issues, and foreign exchange violations each involve different legal elements. Identifying the actual scope of potential liability at an early stage is therefore critical.
 

Decent Law Firm | Digital Asset & Crypto Investigation Team

USDT-related investigations in Korea often involve complex issues extending beyond ordinary crypto transactions, including blockchain tracing analysis, accomplice liability, money laundering regulations, crypto compliance obligations, and foreign exchange law.

At Decent Law Firm, our digital asset and crypto investigation team has experience handling cryptocurrency-related investigations from the initial investigation stage through criminal trial proceedings.

If you have been contacted by Korean investigative authorities or are unsure about the allegations being raised, careful early-stage legal review is strongly recommended.

This article is provided for general informational purposes only and does not constitute legal advice for any specific case.