South Korean Customs Officers Close Net on ‘Kimchi Premium’ Offenders
South Korean customs officials say they have intercepted and tracked down scores of illegal, undeclared “kimchi premium” traders and transactions that reaped profits worth around USD 4.38m.
Back in April, customs officials vowed to carry out a “crackdown” on kimchi premium traders – and now appear to have come good on their promises. Per NoCut News, customs service spokespeople claimed that it had found 33 suspected offenders it claims have violated the nation’s Foreign Exchange Transactions Act. It has sent 14 of these cases to prosecutors’ offices, and handed 15 other fines of up to USD 1.4m for “negligence.” The remaining four cases are still under investigation.
The kimchi premium is a phenomenon whereby increased trading volumes and demand for cryptoassets sometimes rise in excess of the global average on international trading platforms, meaning that buying bitcoin (BTC) for USD, for instance, is more expensive on a South Korean platform like Bithumb than on an international exchange like Binance.
In 2017, South Korean buyers regularly paid 20% more for their tokens than those elsewhere in the world. This phenomenon made a relatively brief comeback earlier this year when skyrocketing prices sent demand through the roof in South Korea. And some traders attempted to take advantage by buying BTC in overseas locations such as China and then selling their holdings for fiat on South Korean platforms at prices up to 8%-14% higher than the global average.
The South Korean government attempted to stamp this practice out by asking domestic banks to cap remittances to China. But it appears some tried to turn kimchi premium trading into a full-time money-spinner.
The customs spokespeople claimed that the group included both institutional traders and university students who had sent large amounts of money abroad disguised as business expenses or funds to help pay for their studies abroad.
The media outlet gave the example of a university student who customs officials claim had opened several overseas bank accounts in their name. This student then proceeded to transfer almost USD 35m worth of fiat out of South Korea in 851 separate instances in an 18 month period from March 2018, each time claiming the funds were “study and living expenses.” In each case, though, the student used the money to buy unnamed cryptoassets, which were then transferred to an exchange and sold for a profit of over USD 1.7m.
In 2017-2018 an office worker, meanwhile, withdrew fiat from ATMs on thousands of occasions, then traveled overseas on 29 instances to buy BTC and other tokens. This persona also proceeded to sell the tokens on a domestic trading platform, reaping USD 1.3m in profits as a result. The worker was ordered to pay fines worth USD 1.1m.