South Korea’s financial watchdog has begun the process of imposing formal sanctions against Donamo, the operator of cryptocurrency exchange Upbit, over a major wallet hack reported in November 2025.
summary
- South Korea’s Financial Services Authority (FSS) has opened sanctions proceedings against Donamo over the Upbit wallet hack case in November 2025.
- The current law lacks direct penalties for piracy, making regulators unsure how severe the penalties will be.
- Upbit compensated affected users and rebuilt wallet systems while regulators continued to closely examine the incident.
The action comes after a months-long examination to see whether the exchange has fulfilled its duties under the country’s Virtual Asset User Protection Law.
According to SBS report Citing financial authorities, the Financial Supervisory Authority recently sent Donamo an inspection opinion letter. The document gives the company a chance to respond before regulators decide what, if any, penalties to follow. The process then moves through several formal regulatory review stages.
FSS is reviewing Upbit’s response to the 2025 hack
The November 27 attack affected assets in Solana that were owned by Upbit. Early estimates varied, with… crypto.news reported losses of around $36 million Based on numbers available at the time. South Korean reports now estimate the amount affected at 44.5 billion won, equivalent to about $32 million at current exchange rates.
Upbit said it moved assets to cold wallets, stopped deposits and withdrawals, and began tracking the stolen funds after discovering the abnormal transfers. In it Official customer noticeThe exchange said that customer losses would be covered by the company’s funds. Authorities later examined both the security failure and the timing of Upbit’s public disclosure.
The legal gap makes potential penalties unclear
The current Virtual Assets User Protection Act gives regulators powers regarding custody, unfair trading and customer protection, but does not specifically establish direct penalties for hacking or computer system failure. This leaves uncertainty about how far the fixed-satellite service can reach in this case.
The regulator will consider Donamo’s response before issuing advance notice of any proposed action. The final actions will require further review by the Sanctions Review Committee, the Securities and Futures Commission and the Financial Services Commission. South Korean authorities are also considering stronger rules on hacking and technology failure in the next phase of digital asset legislation.
Upbit has faced broader regulatory pressure
The breach arrived during a period of close regulatory attention to Dunamu. like I mentioned By crypto.news South Korea’s Financial Intelligence Unit previously fined the company 35.2 billion won for anti-money laundering and failure to verify customers.
This earlier executive action later faced court scrutiny. Crypto.news reported The court overturned the three-month partial suspension against Donamo after discovering loopholes in the legal basis used for the punishment. The recent hacking case could lead to another test of how current laws apply to cryptocurrency exchanges.
Dunamu’s Naver deal is still under review
The sanctions also come as Donamo works through a planned stock swap with Naver Financial. The companies recently delayed closing the deal until December 31 because several regulatory approvals are still pending.
A current inspection does not automatically block this transaction. However, Donamo is still subject to several layers of regulatory review while South Korea prepares broader digital asset rules. The FSS has not yet announced the proposed penalty level in the hacking case, and Donamo still has the opportunity to appeal the inspection results before any final decision is made.
