Upbit headquarters in Gangnam District, Seoul / Newsis

Dunamu, the operator of Upbit, Korea's largest virtual asset exchange, is going all out in its legal battle to overturn financial regulatory sanctions, appointing seven attorneys from major law firm Kim & Chang as its representatives, industry officials said Sunday.

The company filed a lawsuit with the Seoul Administrative Court on Feb. 27 to nullify a partial business suspension that had been imposed by the Financial Intelligence Unit (FIU) under the Financial Services Commission (FSC), and also requested a stay of execution.

The FIU, based on last year's on-site inspection, concluded that Upbit had engaged in transactions with unregistered overseas virtual asset service providers and violated customer due diligence obligations. On Feb. 25, the FIU imposed sanctions, including a three-month partial business suspension and a reprimand warning for Dunamu CEO Lee Sirgoo.

At the time, the FIU, which monitors offshore tax evasion and money laundering, said the partial business suspension restricts the transfer of virtual assets for newly registered customers.

Among the seven Kim & Chang attorneys representing Dunamu are a former chief judge and other judges of the Seoul Administrative Court, as well as a former research judge specializing in administrative cases at the Supreme Court.

This selection appears to be a strategic move, considering the administrative court has jurisdiction over the case. It also aligns with the unique culture of preferential treatment for former high-ranking officials in Korea's legal community.

The remaining attorneys also have significant regulatory experience, having been involved in the FSC's task forces or served as members of the Financial Supervisory Service's financial dispute mediation committee.

This stands in contrast to the FIU, which has assigned only two attorneys to the lawsuit.

Dunamu CEO Lee Sirgoo attends the annual general meeting of the Federation of Korean Industries (FKI) at FKI Tower in Seoul, Feb. 20. Yonhap

The FIU already appears to be on the back foot in the early stages of the trial, as the court has postponed the implementation of the partial business suspension from March 7 to March 27, delaying the FIU's enforcement of the sanctions.

The court will hold a hearing on Thursday to decide whether to suspend the sanctions before the new deadline. For Dunamu, this effectively buys some time.

After the FIU announced sanctions against Dunamu, the company has been emphasizing that they would cause little to no actual business damage. Nevertheless, its all-out legal battle to overturn the sanctions is widely seen as an effort to restore its reputation.

The company previously said the authorities had not fully considered the on-the-ground circumstances when imposing the sanctions, suggesting there was room for legal challenge.

In addition to the partial business suspension, Dunamu still faces the possibility of a fine, as the FIU noted the fine will be decided at a later date.

As the potential imposition of a hefty fine could burden its operations, the firm is unlikely to back down in the ongoing legal battle for the time being.

"We made the decision (to file a lawsuit against the financial authorities) carefully, and it is difficult to comment on the specifics. We will present our case diligently during the trial," a Dunamu official said.