Coinone Hit with $3.5M Penalty and Partial Operations Ban by South Korean Authorities
The cryptocurrency exchange becomes South Korea's latest target in regulatory enforcement actions, marking the second major penalty this month after Bithumb received a $24 million fine and six-month operational restrictions.
According to numerous domestic media sources, Coinone, which ranks as South Korea's third-largest platform for cryptocurrency trading, is now confronting both financial penalties and operational restrictions due to deficiencies in its anti-money laundering protocols.
The Financial Intelligence Unit (FIU), operating under the authority of South Korea's Financial Services Commission, has charged Coinone with non-compliance regarding anti-money laundering requirements, which includes the failure to properly verify user identities in approximately 70,000 instances, as documented by reports from The Korea Times, Chosun, and Yonhap News on Monday.
According to the FIU's allegations, Coinone enabled over 10,000 transactions involving 16 international exchanges that lack registration with South Korean regulatory bodies, and this occurred despite the platform receiving multiple warnings from authorities.
Additional charges encompass violations of customer due diligence requirements, specifically by designating customer verification processes as finished despite the absence of essential information, and by permitting transactions to proceed for customers whose verification procedures remained incomplete.
Cointelegraph contacted Coinone for comment.
Regulatory crackdown against exchanges
This development represents the second instance of South Korea implementing regulatory enforcement measures against cryptocurrency exchanges within the past month, following the case of Bithumb, the nation's second-largest digital currency exchange measured by trading volume, which received a $24 million penalty and faced operational limitations lasting six months in March due to purported anti-money laundering violations.
These enforcement actions follow an incident where Bithumb mistakenly transferred 620,000 Bitcoin (BTC), valued at approximately $42 billion during that period, to customers instead of the intended 620,000 Korean won, which subsequently led the Bank of Korea to advocate for legislators to enact more rigorous regulatory controls on cryptocurrency exchanges.
On Monday, the central bank stated that legislative bodies should evaluate the introduction of trading restrictions that would enable the suspension of trading activities when unusual patterns emerge or in situations where cryptocurrency prices experience sudden volatility.
Fine, partial suspension and CEO reprimand
According to reports, the FIU has levied a penalty of 5.2 billion won ($3.5 million) against Coinone and has implemented a three-month partial operational suspension, which prohibits the exchange from allowing new customer account holders to make deposits or withdrawals until authorities lift the restriction.
Additionally, Cha Myung-hoon, who serves as the exchange's chief executive officer, is facing an official reprimand. Nevertheless, this constitutes an administrative enforcement measure as opposed to a criminal sanction.
Based on the reports, Coinone possesses a 10-day window to challenge the enforcement action before the FIU makes the fine and additional penalties final.