South Korea's Financial Supervisory Service has officially initiated sanctions proceedings against Dunamu, the operator of crypto exchange Upbit, over the major wallet breach reported in November 2025. According to The Korea Herald, the FSS has now sent an inspection report to Upbit's operator, marking a formal escalation in the regulatory process. The FSS has been reviewing whether Dunamu violated the Virtual Asset User Protection Act after the incident, though it remains unclear whether the case will result in severe sanctions due to current legal limitations. The regulator plans to notify the company in advance of the sanction opinion letter, which includes the level of sanctions, after the company provides an explanation. As reported by financial sector sources on July 19, this comes approximately seven months after the FSS launched an inspection following the incident.
The November 27 attack affected Solana-based assets held by Upbit, with early estimates varying widely. According to Yonhap News, losses were initially reported at about $36 million based on figures available at the time, but South Korean reports now place the affected amount at 44.5 billion won, worth approximately $32 million at current exchange rates. The hacking took place over about 54 minutes, from 4:42 a.m. to 5:36 a.m., with approximately 100 billion coins in Solana network-based assets leaked to an external wallet. Upbit responded by moving assets to cold wallets, halting deposits and withdrawals, and beginning to trace the stolen funds after detecting abnormal transfers. In its official customer notice, the exchange stated that customer losses would be covered with company funds. As reported by Yonhap News, Dunamu has now begun freezing and recovery procedures for 2.6 billion won ($1.9 million) of the stolen assets, while 38.6 billion won ($27.8 million) was fully covered with Upbit's own funds. The company faced criticism for a delayed notification, as it only disclosed the hacking incident after the conclusion of a merger event with Naver Financial later that day.
The current Virtual Asset User Protection Act provides regulators powers over custody, unfair trading and customer protection, but it does not set direct penalties specifically for hacking or computer system failures. This legal gap leaves uncertainty around how far the FSS can go in this case. The regulator plans to give Dunamu advance notice of its sanctions recommendation after the company completes its response process, with final measures requiring further review by the sanctions review committee, the Securities and Futures Commission and the Financial Services Commission. FSS Governor Lee Chan-jin stated at a press conference that while there are relative limitations in terms of sanctioning authority, it is not something that can simply be overlooked. South Korean authorities are also considering stronger rules for hacking and technology failures in the next phase of digital asset legislation, with the FSS planning to include regulations on sanctions and compensation for hacking and IT incidents in the second phase of virtual asset legislation (Digital Asset Basic Act).
The latest developments signal a significant shift in South Korea's approach to crypto-finance regulation, with the country's antitrust watchdog approving Mirae Asset Financial Group's acquisition of a 92.06 percent stake in local cryptocurrency exchange Korbit. This marks the first takeover of a digital asset exchange by a financial group in South Korea and represents regulators' growing willingness to allow traditional financial groups to expand into digital assets. As reported by The Korea Herald, the Fair Trade Commission approved the acquisition on grounds that "the restructuring of the digital finance market and innovation in financial services to foster greater competition in the market." This approval comes as Korean authorities reassess strict regulatory barriers that have long separated traditional financial institutions from the digital asset industry, with Financial Services Commission Chairman Lee Eok-won stating that "as regulatory frameworks and legislation continue to evolve globally, it is important to comprehensively assess the changing landscape."
The sanctions process comes while Dunamu works through a planned share swap with Naver Financial, with the companies recently delaying completion of the transaction to December 31 due to several regulatory approvals remaining outstanding. The current inspection does not automatically block that deal, though Dunamu remains under several layers of regulatory review while South Korea prepares broader digital asset rules. The approval of Mirae Asset's Korbit acquisition has drawn attention to the pending Naver-Dunamu merger, which faces different regulatory challenges due to the companies' dominant market positions. Upbit holds nearly 70 percent market share in South Korea's crypto exchange market, while Naver Financial operates the country's largest digital payments platform. The FSS intends to enter a three-week inspection hiatus starting next week and resume inspections from mid-August.
