Korean Police Indicted in $186M Crypto Laundering Scandal

According to the Suwon District Prosecutors’ Office, Police Superintendent “F” allegedly received $59,000 (79 million won) between July 2022 and February 2024 from operators of an illegal private crypto exchange. Officer “G” reportedly accepted $7,500 (10 million won) in cash and luxury goods during the same period. Both officers have been removed from their positions following their arrest, marking a significant breach of law enforcement integrity in South Korea.

The indicted officers allegedly provided investigative information to the crypto operators, introduced lawyers, requested the unfreezing of accounts used for criminal activities, and facilitated connections with other law enforcement personnel. This level of police cooperation enabled the criminal network to operate with reduced risk of detection and prosecution. Kadan Stadelmann, CTO at Komodo Platform, told Decrypt that sharing such investigative details can push suspects “toward mixers and privacy apps that obfuscate evidence and undermine AML efforts.”

The illegal crypto exchanges at the heart of the scandal were disguised as legitimate gift-certificate stores in high-traffic areas like Yeoksam-dong. Prosecutors allege that an unnamed operator, working with CEO “B”, recruited members to form a coordinated team that operated between January and October 2024. The network maintained a facade of legitimacy through signs warning customers to “Beware of Voice Phishing” while simultaneously converting criminal proceeds from these very scams into Tether’s stablecoin USDT.

The sophisticated operation was exposed during prosecutors’ review of a voice-phishing case referred by police. Investigators discovered laundering activity that contradicted an earlier non-indictment decision for CEO B, triggering a deeper supplementary investigation. Authorities have since frozen approximately $1.1 million (1.5 billion won) in illicit assets, including $600,000 (800 million won) in USDT. Prosecutors estimate the group’s total criminal proceeds at roughly $8.4 million (11.2 billion won), with the remainder allegedly spent or concealed.

The South Korean case reflects a growing global pattern of crypto-related corruption involving law enforcement officials. In July, India’s Karnataka state anti-corruption watchdog found that staffer Srinath Joshi and police constable Ningappa allegedly extorted government officials and attempted to launder bribe money through cryptocurrency. Joshi reportedly opened 24 accounts and routed over $470,000 (4 crore rupees) through at least 13 of them.

Similarly, in March, top interrogators from Iran’s Islamic Revolutionary Guard Corps (IRGC) were accused of orchestrating one of the country’s most audacious crypto thefts, embezzling over $21 million in cryptocurrency while investigating defunct exchange Cryptoland and its CEO, Sina Estavi. These cases demonstrate how cryptocurrency’s pseudonymous nature can be exploited by corrupt officials worldwide.

Kadan Stadelmann of Komodo Platform noted that the “larger threat” for governments is a public committed to “privacy and self-custody wallets,” which is “why governments have gone after” mixer developers. This observation highlights the tension between privacy rights and anti-money laundering efforts in the cryptocurrency space, particularly when law enforcement officials themselves become compromised.