Koreans use offshore crypto exchanges to skirt rules and bet on stocks at up to 150 times leverage

Overseas cryptocurrency exchanges are rushing out ultra-high-risk products that let traders bet on the direction of Korean stocks at up to 150 times their daily movements, and red flags have been raised by authorities over how easily these platforms can be accessed by ordinary investors in and outside of Korea.

Binance and other overseas exchanges have rolled out one Korea-linked derivative after another since last month, crypto industry sources said Wednesday.

The flagship example is a perpetual futures contract offering up to 50 times leverage on KORU. The U.S.-listed exchange-traded fund delivers three times the daily return of the Kospi. Because the products track the direction of the index rather than buy actual shares, the industry considers them highly speculative.

Binance, the world's largest crypto exchange, has been the most aggressive. On June 2, it listed products offering 20 times leverage on Samsung Electronics, SK hynix and Hyundai Motor. After strong investor demand, it introduced a KORU product with 20 times leverage on June 22 and raised the cap to 50 times four days later. Since KORU already tracks the Kospi at three times the daily rate, the added 50 times leverage can swing profit or loss to as much as 150 times the index's move.

"If you bet on a rise, even a 1 percent gain in the Kospi could theoretically expand returns to 150 percent," said Kim Min-seung, head of research at Korbit. "But if it falls against your bet, there is a high risk of forced liquidation on even small price moves."

The volatility has been real. KORU plunged 35.7 percent in a single day to $700.01 on June 23, after the Kospi itself dropped 9.99 percent, which magnified losses through the fund's triple leverage.

Binance is not alone. Overseas crypto exchanges like Bybit, OKX and KuCoin also listed KORU products last month offering 10 to 20 times leverage. All are overseas operators that sit outside Korean investor protections.

Only 28 virtual asset service providers — which have registered with the Korea Financial Intelligence Unit (FIU) after obtaining certifications such as Information Security Management System accreditation — are legally authorized in Korea under the Act on Reporting and Using Specified Financial Transaction Information. Bithumb is among them.

Notably, KuCoin was referred to law enforcement for operating in Korea without registering with the FIU.

The concern is that Korean investors can still reach these high-leverage products through offshore exchanges. They buy the stablecoin Tether (USDT) using Korean won on a domestic exchange, then move it abroad to trade. Such ultra-high-risk instruments could ripple back to affect Korea's own market.

"They are not directly buying or selling Kospi shares, but they trade around the clock, and investors' bets on a rise or fall can affect sentiment at home and abroad," Kim said.

Separately, market swings last month pushed forced share sales to a record. When retail investors fail to repay ultra-short-term margin debt, brokerages sell the shares out from under them. The Korea Financial Investment Association said such forced sales against unpaid brokerage margin totaled 1.12 trillion won ($719 million) from June 1 to 30, up 58.6 percent from May's 707.6 billion won and double the 550.8 billion won recorded in March, when the Middle East conflict rattled the Korean market.

BY YEOM JI-HYEON [[email protected]]