Regulators are assessing whether Upbit violated the Virtual Asset User Protection Act, though the law currently imposes no direct sanctions for cyberattacks or hacks.

South Korea’s Financial Supervisory Service has formally opened sanctions proceedings against Dunamu, the operator of Upbit, following the November 2025 wallet hack that targeted Solana-based assets and caused losses of about 44.5 billion won (roughly $32 million).

The FSS issued an inspection opinion letter to Dunamu as the first formal step in the sanctions process, allowing the firm to respond before any enforcement action is decided.

As part of the review, authorities are examining Dunamu’s response procedures and the timeliness of public disclosure once the breach became known.

Upbit remains a major player in the market, ranking third in CoinMarketCap’s crypto spot exchange rankings by traffic, liquidity, and trading volumes.

The outcome of the case could set important precedents for how broadly regulators interpret enforcement powers over crypto platforms and shape industry standards in South Korea.

Regulators plan to address gaps by adding sanctions and compensation provisions for hacking and system failures in the second phase of the Digital Asset Basic Act.

The case has drawn criticism over the delay in public disclosure of the hack, with ongoing regulatory considerations and investigations noted.

Dunamu has a history of regulatory scrutiny, including past anti-money laundering and KYC issues, a disputed 35.2 billion won penalty that was largely canceled by a court, and ongoing oversight related to a potential share swap with Naver Financial.

The FSS’s inspection letter allows Dunamu to respond before sanctions are officially proposed, with final decisions needing approval from the sanctions review committee, the Securities and Futures Commission, and the Financial Services Commission.

In response to the breach, Upbit froze about 2.3 billion won, reimbursed affected customers from company funds, halted deposits and withdrawals, and moved assets to cold storage while overhauling wallet architecture.

To assist recovery efforts, Upbit launched the Onchain AI Tracer System in December 2025 to trace stolen funds on the blockchain.