Chinese money valued at $107 yuan laundered through crypto assets in South Korea

South Korean authorities recently uncovered a large-scale money laundering operation involving an international criminal network. This incident highlights the vulnerabilities of the existing system to illegal Chinese money flows through the rapidly evolving cryptocurrency ecosystem. Local customs officials have referred three Chinese nationals to prosecutors on charges of laundering $107 million (148.9 billion won) in digital assets through various illicit channels.

International Crime Network Exploits Crypto Regulatory Gaps

This arrest comes amid ongoing regulatory uncertainty in South Korea. The country is still struggling to establish a comprehensive framework for the cryptocurrency market, a situation that has created opportunities for criminal networks to operate. Recent reports indicate that due to strict crypto trading restrictions and unclear guidelines, local investors have transferred digital assets worth billions of dollars to overseas platforms, creating an environment conducive to money laundering.

Delays in reaching regulatory agreements have left these gaps open. Law enforcement has long warned that the lack of clear rules makes it easier to smuggle Chinese money and other illegal funds through a still-weak system.

Money Laundering Methods: From WeChat to Unlicensed Crypto Exchanges

Seoul Customs Office revealed the group’s operational mechanisms in alarming detail. The suspects are believed to have received deposits from customers via popular digital payment apps like WeChat and Alipay. From there, they convert the money into cryptocurrency on various unlicensed exchanges that are difficult for authorities to trace.

The group’s operational strategy demonstrates a high level of sophistication. To evade financial oversight, they purchase cryptocurrencies in several countries, then transfer them to digital wallets located in South Korea. Subsequently, these digital assets are converted into Korean won and funneled through a complex network of domestic bank accounts spread across the country.

Masking Illegal Transactions as Legitimate Expenses

A critical phase of this money laundering operation involves disguising the source of funds. The proceeds from crypto conversions are masked as legitimate expenses, including cosmetic surgery costs for foreigners or education fees for students studying abroad. This tactic is designed to avoid suspicion from financial authorities, as such transactions are quite common in countries with internationally mobile populations.

The group’s operation period spanned from September 2021 to June 2025, indicating that this network had been operating with relative impunity for years before being uncovered by customs investigations.

Regulatory Imbalance Drives Local Investors to Foreign Platforms

This case exposes a larger systemic issue within South Korea’s cryptocurrency ecosystem. The absence of a solid regulatory framework has pushed local investors to seek solutions abroad, resulting in Korean citizens’ cryptocurrencies being spread across foreign platforms that are difficult for domestic authorities to monitor.

This phenomenon creates a regulatory paradox: the stricter the restrictions, the more investors turn to overseas platforms, which are harder to supervise. In this environment, the gaps are exploited not only by legitimate investors but also by criminal networks seeking ways to transfer Chinese money and other illegal funds undetected.

The case revelation marks an escalation in South Korea’s efforts to combat money laundering threats in the crypto sector. However, until comprehensive regulations are established, more similar operations are likely to be uncovered in the future. This development underscores the urgent need for the South Korean government to finalize a clear and comprehensive regulatory framework to protect the integrity of the domestic cryptocurrency market from abuse by international criminal networks.