South Korea’s FIU hands Coinone exchange a $3.49 million fine over AML breaches

Coinone exchange has received a three-month partial suspension from South Korea’s Financial Intelligence Unit (FIU) for violating anti-money laundering regulations. 

Another regulatory body in the country, the Financial Supervisory Service (FSS) is simultaneously cracking down on automated trading programs that are being used to manipulate markets and investors. 

The FIU sanctions Coinone

South Korea’s Financial Intelligence Unit (FIU) confirmed a sanctions notice against the local exchange Coinone. The FIU imposed a three-month partial business suspension on the exchange starting April 29, alongside a fine of 5.2 billion won (approximately $3.49 million). 

The sanctions are due to an on-site inspection that was conducted between April and May 2025. The FIU identified that Coinone facilitated approximately 10,113 virtual asset transfer transactions with 16 overseas operators that were not registered or reported under the Specific Financial Information Act (Special Fund Act). 

Furthermore, the exchange was found guilty of systemic lapses in customer verification. The total violations amount to roughly 70,000 cases, including 40,000 instances of improper ID verification and 30,000 failures to restrict transactions for unverified users. 

During Coinone’s three-month suspension, new customers will be prohibited from depositing or withdrawing virtual assets. However, existing customers can continue trading and using fiat (KRW) services normally. 

The FIU also issued an official reprimand to Coinone CEO Cha Myung-hoon.

In response, Coinone stated that it is “strictly aware” of the decision and is pursuing improvements to address the deficiencies pointed out. The exchange added that it has not yet decided whether to file an administrative lawsuit against the FIU, stating it will “carefully review it through the board of directors.”

The sanction against Coinone is similar to the 6-month partial suspension that was imposed on its rival Bithumb in March for AML violations. The National Assembly passed amendments to the AML laws in January, expanding background checks to major shareholders of exchanges to prevent financial crimes.

Can South Korean users use API trading programs?

The Financial Supervisory Service (FSS) revealed that it has launched a targeted investigation into unfair trading practices involving automated trading programs or application programming interfaces (APIs). 

APIs reportedly account for roughly 30% of all transaction volumes in the Korean virtual asset market currently, but authorities suspect they are being weaponized to defraud retail investors. 

The FSS shared specific cases of manipulation to warn the public, such as the “painting the tape” scheme, where a suspect used an API to repeatedly buy and sell small amounts between 5,000 to 10,000 won ($3.50 to $7.00) to create an illusion of high trading volume. 

Simultaneously, they manually placed high-priced buy orders to drive up the price, and once general investors followed the trend, the suspect sold their holdings for a profit.

Another suspect, Suspect B, used the API to automate high-priced purchases to push the market price to a pre-set target, allowing them to sell at inflated levels. 

The FSS has also warned about “spoofing” tactics where users place large fake orders via APIs and cancel them immediately to trick the market about supply and demand. 

The FSS has warned general investors to be wary of coins that see sudden, short-term spikes in volume and price without news. They also warned API users against sharing “high-frequency single-share sales codes” on social media, as regulators view these as abnormal orders. 

“If an excessive repeated sales account is confirmed, we will promptly conduct a planned investigation and take strict measures,” the FSS warned.

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