Court Voids FIU Suspension of Dunamu Exchange, March 9 Ruling

The Seoul Administrative Court’s 5th Division, presiding over Judge Lee Jung-won, ruled on March 9 in favor of Dunamu, overturning the Financial Intelligence Unit’s (FIU) 3-month business suspension order, according to the court’s judgment. The FIU announced plans to appeal the ruling, stating that grounds for contestation remain, per reporting by Digital Asset on the decision. This case marks the first administrative lawsuit challenging regulatory sanctions against a virtual asset exchange for transacting with unregistered operators.

The court document detailing the Seoul Administrative Court’s judgment on the Dunamu-FIU dispute.

Core Ruling and Legal Dispute

The court found that most of Dunamu’s arguments against the FIU’s disposition were valid, determining the FIU’s enforcement order to be unlawful, according to the judgment. However, the court rejected two key contentions from Dunamu: first, that transactions with unregistered operators did not constitute “business transactions” under the Special Finance Act (Teukgeumbeop), and second, that the FIU arbitrarily defined the criteria for identifying unregistered operators without legal basis.

Dunamu had argued that it was fulfilling customer service agreements by processing digital asset withdrawals to customer-specified addresses, and that the destination wallet belonging to an unregistered operator did not constitute a business transaction between Dunamu and that operator, according to the court record. The court rejected this interpretation, ruling that “performing digital asset withdrawal operations at a customer’s request constitutes performing such operations as Dunamu’s own business, thereby qualifying as ‘business financial transactions,’” per the judgment.

Regulatory Framework and Transaction Definition

The Special Finance Act defines a virtual asset operator as any entity engaged in buying or selling digital assets, exchanging digital assets for other assets, brokering or facilitating such exchanges, or transferring digital assets as a business, according to the legal statute cited in the judgment. The Act further designates transaction operations performed by virtual asset operators as “financial transactions,” which forms the basis for regulatory prohibitions.

Under Enforcement Decree Article 10-20(4) of the Special Finance Act, virtual asset operators like Dunamu are prohibited from transacting with unregistered operators, according to the regulatory framework reviewed by the court. The court examined Dunamu’s position that its withdrawal operations were customer transactions, not operator-to-operator transactions, and found this interpretation too narrow. The court stated that accepting such an interpretation would create significant regulatory gaps, particularly concerning money laundering using anonymity and terrorism financing prevention, per the judgment.

FIU’s Criteria for Unregistered Operators

The court acknowledged that the FIU’s criteria for determining which foreign operators must register lack explicit legal foundation, according to the judgment. The FIU determined that foreign operators targeting Korean residents through Korean-language websites, promotional events targeting Korean customers, or Korean won trading and payment support must register with the FIU, per the regulatory standard reviewed by the court.

However, the court found that while these criteria lacked specific statutory basis, they were not arbitrary or unlawful, according to the ruling. The court reasoned that the Special Finance Act applies to conduct occurring outside Korea when its effects extend into Korea, and that the FIU’s judgment criteria for determining when effects extend into Korea are reasonable and not contradicted by law, per the decision. The FIU had previously notified 35 domestic virtual asset operators of the cessation requirement and published a list of unregistered operators based on these criteria, according to the regulatory actions referenced in the judgment.

Compliance Burden and Regulatory Guidance Gap

The court found that Dunamu’s compliance measures—requiring affidavits and implementing Chainalysis screening for transactions under 1 million won—were not necessarily sufficient to block transactions with unregistered operators, according to the judgment. Despite this finding, the court determined that the FIU had not provided specific regulatory guidance on what compliance measures would satisfy the prohibition requirement.

The court acknowledged the FIU’s position that operators must independently implement necessary measures to comply with statutory prohibitions, according to the ruling. However, the court concluded that “in circumstances where the regulatory authority provided no specific guidance on compliance measures, Dunamu cannot be deemed to have acted with intent or gross negligence merely because its measures proved insufficient in hindsight,” per the judgment. The court therefore determined that the FIU’s 3-month business suspension—a severe sanction—must be overturned because the grounds for the disposition were not established, according to the ruling.

Frequently Asked Questions

Q: What was the Seoul Administrative Court’s main finding in this ruling?

A: The court found that the FIU’s 3-month business suspension order against Dunamu was unlawful and must be overturned. While the court confirmed that Dunamu did conduct transactions with unregistered operators, it determined that Dunamu acted without intent or gross negligence due to the absence of specific regulatory guidance on compliance measures, according to the court’s judgment.

Q: Why did the court reject Dunamu’s argument that its transactions were with customers, not unregistered operators?

A: The court ruled that performing digital asset withdrawals at a customer’s request constitutes Dunamu’s own business operation, qualifying as a prohibited “business transaction” under the Special Finance Act. The court reasoned that accepting Dunamu’s interpretation would create regulatory gaps in preventing money laundering and terrorism financing, per the judgment.

Q: What happens next in this case?

A: The FIU announced plans to appeal the Seoul Administrative Court’s ruling to a higher court, stating that grounds for contestation remain, according to reporting on the decision. The appeal process will determine whether the first-instance ruling stands or is overturned.