South Korea’s Financial Supervisory Service has initiated a formal sanctions process against Dunamu, the operator of the Upbit crypto exchange, following a $36 million security breach in November 2025.

Key Points

• The Financial Supervisory Service issued an inspection opinion letter to Dunamu to begin the formal sanctions procedure.
• Upbit faced public criticism for delaying the disclosure of the $36 million hack for nearly 24 hours after the incident occurred.
• Regulators are currently evaluating potential violations of the Virtual Asset User Protection Act despite a lack of explicit provisions for cyberattacks.
• Dunamu has committed to fully reimbursing affected customers using its own corporate assets and has overhauled its crypto wallet architecture.
• The company launched an Onchain AI Tracer System to track stolen funds and assist in recovery efforts.
• South Korean authorities intend to close existing regulatory gaps by introducing new sanctions and compensation requirements in the upcoming Digital Asset Basic Act.

Why it Matters

This investigation highlights the current limitations of South Korea's regulatory framework in addressing large-scale crypto exchange hacks. The outcome of this case will likely influence future legislation and set a precedent for how major exchanges are held accountable for security failures.