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In June 2026, the Financial Services Commission (FSC) and the Korea Financial Intelligence Unit (KoFIU) announced that 12 suspected illegal virtual asset operators had been referred to the police following a joint investigation by DAXA and registered virtual asset service providers.

According to the announcement, the investigation identified 8 illegal over-the-counter (OTC) crypto dealers and 4 overseas exchanges suspected of conducting business targeting Korean users without proper registration.

These operators allegedly attracted users through Telegram, websites, open chat rooms, Korean-language services, KRW payment support, and domestic marketing activities.

The Korean financial authorities have also warned that users of unregistered virtual asset service providers may face unexpected disadvantages, including being subject to investigation during the process of verifying counterparties and the source of funds.

This article explains the key legal risks that may apply to users of illegal crypto OTC channels in Korea and how investigative authorities may assess the user’s knowledge and intent.
 

Key Laws That May Apply

Under Korea’s Act on Reporting and Using Specified Financial Transaction Information, commonly referred to as the Specified Financial Information Act, virtual asset service providers must report to KoFIU before conducting business in Korea.

An operator that conducts virtual asset business without proper reporting may be subject to criminal penalties under Article 17 of the Act, including imprisonment of up to 5 years or a fine of up to KRW 50 million.

In principle, the direct target of punishment under this provision is the unregistered business operator. However, depending on the circumstances of the transaction, users may also be investigated under other laws.
 

For ordinary users, direct liability for violating AML obligations under the Specified Financial Information Act is generally limited.

In actual investigations, however, authorities tend to focus more closely on the source of funds, the identity of the counterparty, the transaction pattern, and the reason for using an OTC channel instead of a registered exchange.
 

Key Legal Issue: The User’s Knowledge

Illegal crypto OTC channels are often considered high-risk because they can make fund flows difficult to trace. For this reason, they may be misused for converting or concealing funds related to crimes such as narcotics, illegal gambling, phishing, or other fraud.

In these cases, the key issue is whether the user knew, or could reasonably be seen as having known, that the funds were criminal proceeds or that the transaction structure was abnormal.

The Supreme Court of Korea has held that, for a violation of the Criminal Proceeds Concealment Act, it is sufficient for the person to recognize that the property in question constitutes criminal proceeds. The person does not necessarily need to know the exact type or details of the underlying crime.

Supreme Court Decision 2006Do5288, January 11, 2007

In other words, even if the user did not know the specific crime involved, intent may still be recognized if the user was aware that the funds were illegal in nature.

Therefore, simply saying that the user did not know the operator was unregistered may not be enough. The user must be able to explain, based on the transaction history and structure, why there was no reasonable basis to suspect illegality.
 

Circumstances Investigators May Review

When it is difficult to directly confirm a user’s intent, investigative authorities may infer the user’s knowledge from the surrounding circumstances.

Common factors include:

· Use of unofficial trading channels
Trading through Telegram channels, open chat rooms, or private OTC groups instead of registered exchanges.

· Repeated or continuous transactions
Using the same method over a long period of time or conducting multiple transactions.

· Unclear source of funds
Difficulty identifying where the funds came from or who the true counterparty was.

· Abnormal conditions compared to registered exchanges
Using a structure that allows KRW payments, fast conversion, or trading without proper identity verification.

Authorities usually do not rely on a single factor alone. Instead, they assess the overall transaction period, frequency, amount, channel characteristics, and fund flow to determine whether the user may have recognized the illegality of the transaction.
 

Decent Law Firm Virtual Asset Practice Group

Investigations involving users of illegal crypto OTC channels often involve multiple legal issues at the same time, including violations of the Specified Financial Information Act, the nature of the transaction funds, and whether the user had knowledge of criminal proceeds.

Decent Law Firm’s Virtual Asset Practice Group has advised and represented clients in matters involving unregistered virtual asset service providers, OTC crypto transactions, and criminal proceeds concealment allegations from the early stages of investigation.

If you have been contacted by the police or prosecutors in Korea, or if you are unsure about the nature of the allegations, it is important to review your transaction history and response strategy before attending any investigative interview.



Source: Financial Services Commission, Press Release on Caution Against Using and Trading with Illegal Virtual Asset Operators, June 24, 2026

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