(Bloomberg) -- South Korean prosecutors made their first arrests in a probe of $3.4 billion worth of foreign-exchange transactions for possible links to illegal cryptocurrency-related activities. 

Three people were held on allegations including setting up paper companies and operating a cryptocurrency trading business without registration, the Daegu District Prosecutors’ Office said in a text message on Thursday.

The other charges were connected to false data submissions to banks and substantial foreign currency transfers abroad, according to the office.

The people arrested are linked to a firm that sent 400 billion won ($307 million) worth of funds overseas from a Woori Bank branch in Seoul to earn arbitrage profits, the Chosun Ilbo newspaper reported.

The prosecutors’ office didn’t give specific figures. Woori Bank declined to comment as it is not privy to the details of the ongoing investigation.

South Korea’s Financial Supervisory Service has said that unusual transactions totaling 1.6 trillion won took place at five branches of Woori Bank between May 2021 and June 2022. Similar transactions worth 2.5 trillion won were detected at 11 branches of Shinhan Bank between February 2021 and July 2022, it said. 

Both the banks last month declined to comment on the supervisory service’s investigation.

Asia’s fourth-largest economy used to stand out for the comparatively wide adoption of digital tokens there. 

But the $40 billion wipeout in South Korean entrepreneur Do Kwon’s Terraform Labs ecosystem delivered a damaging blow to confidence. The implosion sparked a global crypto rout after the TerraUSD stablecoin unraveled. 

©2022 Bloomberg L.P.