This case involved a client who developed and provided an automated trading program designed to take advantage of price differences between virtual asset exchanges. The client was investigated for an alleged violation of the Act on Reporting and Using Specified Financial Transaction Information on the grounds that the provision of the program allegedly constituted the business of brokering, intermediating, or acting as an agent for the purchase, sale, or exchange of virtual assets without filing the required virtual asset service provider report.

During the investigation, Cha & Kwon Law Offices focused on the key issues of whether the client directly received or held users’ funds or virtual assets, and whether the client was directly involved in the execution of purchase or sale transactions.

Cha & Kwon Law Offices did not merely argue that the client was not a virtual asset service provider. Instead, we established a defense strategy by organizing objective materials demonstrating that the client’s conduct did not constitute virtual asset service provider business. These materials included the technical operating structure of the program, under which users directly connected their own exchange accounts and API keys and executed trades on their own; the Financial Services Commission’s existing virtual asset service provider reporting guidelines and interpretive positions; and relevant Supreme Court precedents concerning the standards for determining agency, brokerage, and intermediation.

We further emphasized that the program operated only with permissions to place orders, check balances, and view trading histories, without any deposit or withdrawal authority. Accordingly, the program did not implicate the legislative purpose of the reporting regime, namely anti-money laundering regulation. We also argued in a logical and structured manner that the client had no intent to evade reporting obligations.

As a result, the investigative authority determined that the client did not directly receive users’ funds or virtual assets and was not involved in the execution of purchase or sale transactions. It therefore found it difficult to conclude that the client had engaged in unreported virtual asset service provider business, and ultimately issued a decision not to forward the case to the prosecution on the grounds of no suspicion.

This case demonstrates that, in criminal matters involving virtual assets, the technical substance of the service and the degree of direct involvement in users’ funds or virtual assets can serve as critical elements of defense.