Dunamu, which operates Upbit, the country's No. 1 virtual asset exchange, has hired former officials-turned-lawyers from the Financial Intelligence Unit (FIU) and the Financial Supervisory Service, as well as a former chief judge-turned-lawyer, to fight an administrative lawsuit seeking to overturn a partial business suspension ordered by the FIU. Dunamu must undergo a Financial Supervisory Service review as part of its merger with NAVER, and there is talk that it is staking everything on the lawsuit against the FIU to reduce uncertainty.
According to the financial sector on the 11th, Dunamu assembled a legal team for its lawsuit against the FIU with lawyers who previously worked at the FIU and the Financial Supervisory Service (FSS). Former judges, including a former court president and senior judges, also joined. All are at Kim & Chang.
Attorney Jeong Young-gi (48, 35th class of the Judicial Research and Training Institute) for Dunamu served as an FIU policy advisor from 2020 to 2023. Attorney Kim Jun-young (45, 36th class) served as an expert member of the Financial Supervisory Service (FSS) Financial Dispute Mediation Committee from 2017 to 2021. Attorney Lee Jae-hong (69, 10th class), a former president of the Seoul Administrative Court; Attorney Yoon In-seong (57, 23rd class), a former senior judge of the Seoul Administrative Court; and Attorney Lee Hyo-je (49, 29th class), a former research judge at the Supreme Court, were also listed on Dunamu's defense team. There is also Attorney Shin Won-il (49, 32nd class), who was a Supreme Court research judge until 2023.
The FIU is also responding by appointing Attorney Lim Hye-jin (48, 31st class) of law firm Dongin, who took honorary retirement in 2021 as a High Court judge at the Seoul High Court.
The trial under way at the Seoul Administrative Court has held three hearings in total since July. Dunamu recently argued in court that "because there was no intent or gross negligence, the business suspension should be canceled." The FIU countered that "Dunamu was aware of deficiencies but did not take sufficient measures."
Back in Feb., the FIU imposed a three-month partial business suspension on Dunamu for violations including failure to comply with anti-money laundering obligations. In June, it imposed fines of 35.2 billion won.
Starting in late Aug. last year, the FIU conducted an on-site inspection related to Upbit's application to renew its business license. The inspection found that Upbit supported 44,948 cryptocurrency transfer transactions with 19 overseas, unregistered cryptocurrency businesses that had not fulfilled reporting obligations. The FIU also confirmed that Upbit violated customer due diligence obligations and transaction restriction obligations.
Dunamu is currently proceeding with a merger with Naver Financial. They plan to submit a securities registration statement and undergo a Financial Supervisory Service (FSS) review. The FSS is reportedly reviewing the level of protection for shareholder rights on both sides, internal controls, and system stability.
In the FSS review process, the fact that Dunamu received administrative sanctions such as a partial business suspension and fines could weigh negatively. An industry official said, "Dunamu is in a situation where it has no choice but to stake everything on the lawsuit against the FIU."
The recent hacking of 44.5 billion won worth of virtual assets from Upbit could also hurt the review. FSS Governor Lee Chan-jin said on the 1st regarding the Upbit hacking incident, "This is not something that can just be brushed aside," adding, "Given that a problem has arisen that threatens trust in the most important system security related to virtual assets, we will conduct additional checks to see whether supplementation and reinforcement are needed in the second phase of legislation related to virtual assets."