April 28 (UPI) -- An increasing number of foreign investors are taking advantage of arbitrage opportunities in South Korea's cryptocurrency exchanges, but the transactions could be illegal, according to a South Korean press report.
The Korea Customs Service said speculators from China and other countries have been buying bitcoin at a discount in their countries of origin, and then selling the virtual currency at a "kimchi premium" in Korea, South Korean television network JTBC reported Wednesday.
A total of 10 groups were found to be engaging in the trade. Their transactions amounted to 1.4 billion Korean won, or about $1.26 billion, the report said.
The South Korean agency also disclosed the illegal activities were used to the purchase Korean apartments using money earned from bitcoin arbitrage, Business Korea reported Wednesday.
The 10 groups purchased 39 apartments worth $59.7 million. A total of 61 foreign nationals affiliated with the groups had purchased the apartments using their cryptocurrency profits, the report said.
The transfer of money from the cryptocurrency market to other markets is illegal in Korea, according to the customs service.
Among the 61 defendants, 44 people violated Seoul's Foreign Exchange Transactions Act by not reporting transaction details to local authorities, the agency said, according to Business Korea.
The South Korea provided a breakdown of the group, which included 34 Chinese passport holders, 19 U.S. citizens and two Australians.
Gongpil Choi, a director at the Korea Institute of Finance, told JTBC the South Korean virtual currency market has become a "playground" for Chinese speculators with deep pockets.
"You could say that Korean exchanges almost act as cash dispensers," Choi said.
Kimchi premium is the gap in virtual currency prices between South Korean exchanges and other exchanges worldwide. The premium appears when currencies trade higher in Korea than in other markets.