Last week, the agency revealed a $290 billion gap between reported trade values and bank records. As a result, KCS announced year-round intensive inspections to tackle illegal money flows.

Cosmetic Surgery Used to Mask Transfers

From September 2021 to June 2025, the network moved crypto assets from abroad into South Korean digital wallets. Then, it converted the funds into local currency.

To disguise the transfers, suspects labeled them as cosmetic surgery or education expenses. Consequently, authorities had difficulty detecting the flow at first.

Key Details of the Operation

• Route Tracked: Crypto assets were bought in multiple countries and transferred into South Korean accounts.

• Illegal Scheme: Investigators believe the network exploited foreign exchange fluctuations to move capital overseas.

• Market Context: South Korea’s crypto market reached $64.6 billion in June 2025. Daily trading averaged $4.3 billion, explaining why stricter oversight is expected.

Eyes on New Regulations

The South Korean Supreme Court ruled that Bitcoin can be seized as an asset. This strengthened the legal basis for prosecuting crypto-based money laundering.

Moreover, a 2025 inspection found that 97% of examined companies were linked to illicit transactions. KCS officials announced intensified inspections targeting underground banking operations that threaten foreign exchange stability. As a result, those relying on crypto anonymity face increasing scrutiny.

Crypto Market Under Increased Oversight

Following the network’s collapse, the market is closely watching KCS’s regulatory measures. South Korea remains a global crypto leader, but rising transaction volumes have increased the need for tighter regulation.

Supreme Court rulings empowering authorities to seize crypto assets have further strengthened prosecutorial control. Therefore, KCS has made it clear that it will take a zero-tolerance approach to illegal underground banking. Investors now monitor how these inspections will affect local liquidity and pricing.

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500 Accounts, One Crypto Scam

Twelve individuals were arrested across Hong Kong and mainland China in connection with a laundering ring that used over 500 bank accounts to funnel illicit funds into crypto. Fraud proceeds were routed through these accounts and converted into digital currencies at local crypto exchange shops.

Authorities discovered the group had been operating out of a residential flat in Mong Kok, turning the location into a base for planning and executing their illegal activities. Over $1.2 million was tied to 58 known fraud cases.

Busted in Real Time

On May 15, two suspects were observed leaving the Mong Kok base — one went to a bank, the other to an ATM. Both then attempted to convert the cash into crypto in Tsim Sha Tsui. Police arrested them on the spot, seizing nearly $98,540 before the money could be laundered.

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Soon after, 10 more people aged between 20 and 41 were arrested. In total, police confiscated $134,370 in cash, more than 560 ATM cards, mobile phones, bank documents, and records of crypto transactions.

According to Senior Inspector Tse Ka-lun, many suspects used bank accounts opened under friends’ or family members’ names to facilitate the laundering process.

Hong Kong Ramps Up Crypto Oversight

This case emerges as Hong Kong rolls out a more robust regulatory framework for the crypto industry. In April, new rules for exchanges offering staking services were introduced, followed by a comprehensive crypto roadmap in February focusing on compliance, infrastructure, and investor protection.

As Bitcoin, Ethereum, and other digital assets grow in appeal, so does the need for tighter security and regulation. Hong Kong’s proactive approach signals its intention to be both a hub and a safe haven for crypto innovation.

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In a rule proposal released on May 1, the Treasury’s Financial Crimes Enforcement Network (FinCEN) urged US banks to terminate correspondent and payable-through account services for Huione.

Deputy Treasury Secretary Scott Bessent described Huione as the “marketplace of choice for malicious cyber actors,” accusing it of aiding the theft of billions from ordinary Americans.

$4B Laundered, USDH Highlighted

According to FinCEN, Huione laundered over $4 billion in illicit funds between August 2021 and January 2025, including at least $36 million from crypto “pig butchering scams” and $37 million directly linked to North Korean cyberattacks.

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Its online service Haowang Guarantee has turned Huione into a one-stop crypto laundering hub, offering illegal goods and converting crypto to fiat currency.

FinCEN also flagged Huione’s stablecoin, the USDH (US dollar Huione), for its unfreezeable nature, which allegedly supports laundering operations.

Indirect US Bank Access and Regulatory Action

While Huione doesn’t hold direct accounts with US banks, FinCEN revealed it maintains accounts with foreign intermediaries that do, giving it indirect access to the US financial system.

The National Bank of Cambodia revoked Huione’s local banking license in March 2025, citing digital asset violations.

The proposed rule will undergo a 30-day public comment period before potentially being finalized.

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Southeast Asia Becomes Crypto Crime Hotspot

One case highlighted is Huione Guarantee (now rebranded as Haowang), a Chinese-language platform operating out of Phnom Penh, Cambodia. Over the past four years, it has facilitated over $24 billion in crypto linked to fraud and scam operations, growing to over 970,000 users.

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The platform has launched its own crypto exchange, blockchain (Xone Chain), online gambling services, and even a US dollar-backed stablecoin aimed at bypassing government oversight. In February 2025, the group unveiled a Huione Visa card.

Billions Of Dollars Laundered Through Custom Coins And Exchanges!

The report warns that criminal groups in Myanmar, Laos, and Cambodia are industrializing cybercrime with AI, blockchain, and stablecoins, executing phishing, fake investments, and romance scams — collectively known as pig butchering — on a massive scale.

Recent crackdowns in Hong Kong, Nigeria, and other countries have led to hundreds of arrests. In October 2024, 27 people were arrested in Hong Kong for running a deepfake-powered crypto scam worth $46 million. In December, 792 suspects were caught in Lagos, Nigeria.

The UN warns these groups are leveraging their own stablecoins and private exchanges to circumvent AML laws and move funds freely across borders. The threat is growing beyond Asia — into Africa, South America, and the Pacific.

Governments are urged to close loopholes and prepare for this expanding form of financial crime.

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The new guidelines have been developed after extensive consultation with industry stakeholders to ensure they are practical and effective.

MASAK has streamlined the suspicious transaction reporting form to make it more user-friendly and align with current financial technologies.

The updated guidelines include new categories of suspicious activities to reflect evolving criminal typologies.

Cryptocurrency service providers are now required to select a specific suspicion category when submitting reports.

The online reporting system has been redesigned to accommodate the new guidelines and offer a more efficient user experience.

Cryptocurrency service providers operating in accordance with the Capital Markets Law No. 6362 must adhere to the new guidelines and submit suspicious transaction reports through the updated MASAK Online 1.0 system starting from July 26, 2024.

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