Voice Phishing Account Freezes in South Korea: Can the Account Holder Sue the Victim?

A financial institution in South Korea froze an account after KRW 25 million deposited into it was reported as voice phishing proceeds. The account holder said the money came from an ordinary transaction through a Chinese currency exchanger and had nothing to do with the fraud, and sued the victim for a declaration that nothing was owed. The court dismissed the suit without deciding whether that was true (Seoul Central District Court, August 11, 2026, 2025Gadan66813).

South Korea’s voice phishing relief system is designed to return stolen money to victims quickly, without litigation. Once a victim reports the fraud, the accounts through which the money moved are frozen, and after a set period the account holder’s deposit claim is extinguished and refunded to the victim. A 2018 amendment added a provision allowing the account holder and the victim to sue each other, including for a declaration that no debt exists (Article 4-2(2) of the Telecommunications Fraud Refund Act). Since then, account holders seeking to lift freezes have filed a steady stream of such suits.

The Seoul Central District Court decision discussed here involved a victim who had already received a refund. The court held that in that situation the account holder must turn to the Financial Supervisory Service, not the victim. For suits filed while a freeze is still in place, Korean trial courts have not been consistent. This article compares the decision with ten other trial and appellate decisions verified against their original texts.

What happened in this case?

The facts as found by the court are as follows. We refer to the account holder as the plaintiff and the voice phishing victim as the defendant (Seoul Central District Court, August 11, 2026, 2025Gadan66813).

The plaintiff argued that the deposit came from a legitimate transaction through a Chinese currency exchanger and that the plaintiff had no involvement in the fraud, and asked the court to declare that no obligation to return the KRW 25 million existed. Before reaching that question, the court examined on its own motion whether the action satisfied the requirement of a legal interest in a declaratory judgment, found that it did not, and dismissed the action (Seoul Central District Court, August 11, 2026, 2025Gadan66813).

The judgment therefore says nothing about whether the plaintiff was involved in the fraud. A dismissal means “this lawsuit is the wrong vehicle,” not “the plaintiff’s account of the facts is wrong.”

How does the voice phishing relief procedure work in South Korea?

the Telecommunications Fraud Refund Act lets victims recover funds quickly without going to court, through the following steps. The court walked through the same sequence (Seoul Central District Court, August 11, 2026, 2025Gadan66813).

Once the victim is refunded, the victim’s damages claims and other claims arising from the fraud are extinguished to the extent of the refund (Article 12 of the Telecommunications Fraud Refund Act).

An account holder may object on three grounds: (1) showing that the account is not a fraud-related account; (2) showing with objective evidence that the funds were received as payment for goods or services or otherwise acquired under a legitimate right; or (3) showing with objective evidence that the account was not used to obtain the victim’s assets. Ground (2) is unavailable if the holder knew, or through gross negligence did not know, that the account was being used for the fraud (Article 7(1) of the Telecommunications Fraud Refund Act).

Why did the court dismiss the case without reaching the merits?

Under Korean civil procedure, a declaratory action is allowed only where the plaintiff’s rights or legal position face a present risk and obtaining a declaratory judgment against the defendant is the most effective and appropriate way to remove that risk (Supreme Court of Korea, February 15, 2013, 2012Da67399; Supreme Court of Korea, September 10, 2015, 2014Da227829). Applying that test, the court found the plaintiff’s suit was not an effective or appropriate means (Seoul Central District Court, August 11, 2026, 2025Gadan66813).

An extinguished claim has its own remedy

The defendant had received the refund through the statutory procedure, and the plaintiff’s claim had already been extinguished. The court held that the plaintiff could instead claim a refund of the extinguished claim from the FSS by showing that the account was not a fraud-related account and that there was a justifiable reason for not objecting in time. Given that separate remedy, a declaration against the victim that an already extinguished debt does not exist would not remove any risk to the plaintiff (Seoul Central District Court, August 11, 2026, 2025Gadan66813; Article 13(1) of the Telecommunications Fraud Refund Act).

Four further reasons

The court added the following considerations (Seoul Central District Court, August 11, 2026, 2025Gadan66813).

• Burden of proof — The holder can prove directly, through an objection, that the account is not a fraud-related account. In a declaratory action, by contrast, the victim must prove the basis of the debt, so the holder’s win may mean only that the victim failed to prove it. Shifting an affirmative burden onto the victim was unfair.
• Meaning of Article 8 — The Act treats a pending lawsuit as a ground for ending the extinguishment procedure, but only the pendency of the suit. A win in that suit does not automatically lift the freeze.
• The objection is the proper route — A judgment against the victim cannot be assumed to be a better way to lift the freeze than proving the statutory grounds for objection.
• Legislative purpose — If such suits were broadly allowed and the judgments used as evidence for an objection, holders could bypass the formal objection process by suing victims. That would defeat the Act’s aim of restoring victims’ losses quickly and placing the burden of explanation on the account holder.

Doesn’t filing a lawsuit lift the freeze?

Only in part. If, after the suspension, a declaratory or unjust enrichment action between the holder and the victim is pending in court, the institution may not request public notice of the extinguishment procedure, and the suspension and procedure must end (Articles 5(1)5 and 8(1)1-2 of the Telecommunications Fraud Refund Act). Even then, the suspension is not lifted for the portion of the balance that represents the victim’s fraud loss (Article 8(2)1-2 of the Telecommunications Fraud Refund Act).

Another judge at the Seoul Central District Court stressed this point: the fraud-loss portion stays frozen while the suit is pending, and the statute does not clearly make a final win in such a suit a ground for ending the freeze. It therefore held that a declaratory judgment against the victim would not end the freeze, and dismissed a suit filed while the account was still frozen (Seoul Central District Court, June 18, 2026, 2025Gadan109895).

Do other Korean courts agree?

We have not yet found a Supreme Court of Korea decision that addresses this issue directly. Among trial and appellate courts, the outcome depends on timing. Suits filed after the claim was extinguished and refunded have consistently been dismissed, while rulings on suits filed during a freeze are not consistent.

Suits filed after extinguishment and refund: consistently dismissed

The Seoul Northern District Court held that asking for a declaration that no duty exists to return money already refunded to the victim concerns a past legal relationship and lacks a legal interest (Seoul Northern District Court, May 24, 2022, 2021Gadan123601). The Seoul Central District Court reached the same result in 2024. Notably, it found it hard to say that the plaintiff, who had sold gift certificates and received the price, knew or was grossly negligent about the fraud, yet it still dismissed the declaratory claim because that plaintiff could seek a refund from the FSS; it also held that the victim’s refund was not unjust enrichment (Seoul Central District Court, May 8, 2024, 2023Gadan5224139). The Namyangju Branch of the Uijeongbu District Court noted that the victim did not assert any claim beyond the refund already received (Uijeongbu District Court, Namyangju Branch, July 8, 2026, 2025Gadan5523).

Suits filed during a freeze: rulings are not consistent

The Ulsan District Court, recognizing the interest, held that as long as the account remained frozen the plaintiff had a legal interest in suing to lift the freeze and resolve the dispute over the duty to return the funds, because Article 4-2 of the Telecommunications Fraud Refund Act contemplates that an account holder may resolve the matter by suing the victim for a declaration that no debt exists (Ulsan District Court, June 12, 2025, 2024Gahap13223).

The Seongnam Branch of the Suwon District Court also recognized the interest, but warned that applying the ordinary burden of proof would force victims to prove the crime and the path of the funds. It held that once the victim proves the fraud and the movement of funds into the account, a duty to return is presumed unless the holder proves one of the grounds for objection under Article 7(1). The plaintiff there proved that the money was the price of virtual assets it had sold, and won (Suwon District Court, Seongnam Branch, July 8, 2026, 2026Gadan10288).

The Daegu District Court, by contrast, dismissed on reasoning almost identical to the Seoul Central District Court decision discussed here (Daegu District Court, July 15, 2026, 2025Gadan109703). The Pyeongtaek Branch of the Suwon District Court warned that reading Article 4-2(2) broadly would effectively force victims to defend suits without knowing how the funds moved or how the holder related to the criminal ring, and held that the provision alone does not establish a legal interest (Suwon District Court, Pyeongtaek Branch, August 13, 2026, 2025Gadan54855).

How do courts treat the “legitimate currency exchange” defense?

Like the plaintiff here, many account holders say the funds were proceeds of a currency exchange. Where courts reached the merits, outcomes varied with the facts, and in one case the holder who sued ended up ordered to repay the victims.

A case where the defense failed

A plaintiff who said they exchanged currency in the Philippines as a side job received KRW 281 million over three days from four victims, converted it into Philippine pesos at the request of “H,” whom the plaintiff had met at a casino in the Philippines, and sent it to a casino account H designated. When the plaintiff sued the victims for a declaration of non-liability, the trial court dismissed the claim for the refunded portions and, finding knowledge or gross negligence, granted one victim’s counterclaim (Suwon District Court, Anyang Branch, July 10, 2025, 2024Gadan132157 (main claim) and 2025Gadan822 (counterclaim)).

The Suwon High Court dismissed the plaintiff’s appeal in full and also granted a new counterclaim filed by another victim on appeal, ordering the plaintiff to pay that victim KRW 71,886,121. The KRW 38,099,645 awarded at trial stood. Each amount was the victim’s loss minus the refund received (Suwon High Court, July 9, 2026, 2025Na12622 (main claim), 2025Na12623 and 2025Na13155 (counterclaims)).

The court pointed to the following (Suwon High Court, July 9, 2026, 2025Na12622 (main claim), 2025Na12623 and 2025Na13155 (counterclaims)).

• Converting the money into Philippine currency on request was an unregistered currency exchange prohibited under the Foreign Exchange Transactions Act, a method often used to launder criminal proceeds
• The plaintiff obtained no objective record of the client’s identity, the purpose of the exchange, or the source of funds
• The client and the actual senders were different people, and KRW 281 million arrived in several transfers over three days
• The exchange value at the prevailing rate was lower than the amount received, yet the plaintiff kept the full amount

The court found that the plaintiff knew, or through gross negligence did not know, that the funds had been obtained by fraud, so the plaintiff had no legal basis for keeping them as against the victims. The claim concerning the refunded portions was dismissed as a request to confirm a past legal relationship (Suwon High Court, July 9, 2026, 2025Na12622 (main claim), 2025Na12623 and 2025Na13155 (counterclaims)).

Cases where exchange or sale proceeds were accepted

The Ulsan District Court found considerable room to view KRW 90,896,000 deposited into the plaintiff’s account as the proceeds of exchanging PHP 3,760,000 that the plaintiff had arranged. The victims’ money had also passed through other accounts before reaching the plaintiff’s account, so the victims’ evidence was insufficient to show unjust enrichment or participation in the fraud (Ulsan District Court, June 12, 2025, 2024Gahap13223). The Seongnam Branch of the Suwon District Court treated KRW 36 million that a plaintiff received through an escrow account on a virtual asset trading site as the price of coins the plaintiff had sold (Suwon District Court, Seongnam Branch, July 8, 2026, 2026Gadan10288).

The dividing line is how well the holder verified the counterparty and the source of funds, and whether the holder can show it with objective records. That is also what the Act requires at the objection stage (Article 7(1) of the Telecommunications Fraud Refund Act).

The Act was renamed in 2026. Does this ruling still matter?

Yes. Under Act No. 21503, amended on March 31, 2026, the Act’s Korean title was changed to refer to the refund of damaged assets rather than damaged funds, and inducing victims to transfer virtual assets was brought within the definition of telecommunications financial fraud. The amended Act has been in force since October 1, 2026, six months after promulgation.

Articles 7 (objections), 8 (end of suspension), 9 (extinguishment of claims), 10 (decision on and payment of refunds), 12 and 13 (refund of extinguished claims), on which the court relied, remain in the amended Act under the same numbers. What changed is mainly terminology, such as “damaged funds” becoming “damaged assets” and “financial institutions” becoming “financial institutions, etc.” The court’s reasoning can be applied to the amended Act in the same way.

One more provision matters for account holders: a person who files a false application for relief is liable for the damage the resulting freeze causes to the account holder (Article 11-2 of the Telecommunications Fraud Refund Act).

What should account holders and victims do?

Based on this decision and the related rulings, Atlas Legal suggests the following checkpoints in account-freeze cases.

If you are the account holder

• Prepare an objection to the financial institution as soon as you receive notice. The deadline runs from the date of the suspension until two months have passed from the public notice date under Article 5(2) (Article 7(1) of the Telecommunications Fraud Refund Act). Once that period lapses, the claim is extinguished (Article 9(1)).
• An objection requires objective evidence: the counterparty’s identity, how the transaction came about, messages, sale or exchange records, and how the price was calculated. If you knew, or through gross negligence did not know, that the account was being used for fraud, the “legitimate acquisition” ground is unavailable (Article 7(1)2 of the Telecommunications Fraud Refund Act). Submit only truthful material; a false objection is a criminal offense (Article 16(4) of the Telecommunications Fraud Refund Act).
• If the claim has already been extinguished, the remedy is a refund claim with the FSS, not a suit against the victim. You must fall under a ground for objection and have a justifiable reason for not objecting in time (Article 13(1) of the Telecommunications Fraud Refund Act; Seoul Central District Court, August 11, 2026, 2025Gadan66813).
• Suing the victim does not lift the freeze on the fraud-loss portion while the suit is pending (Article 8(2)1-2 of the Telecommunications Fraud Refund Act). The suit may be dismissed (Seoul Central District Court, June 18, 2026, 2025Gadan109895; Daegu District Court, July 15, 2026, 2025Gadan109703; Suwon District Court, Pyeongtaek Branch, August 13, 2026, 2025Gadan54855), and the victim may counterclaim for return of the funds (Suwon High Court, July 9, 2026, 2025Na12622 (main claim), 2025Na12623 and 2025Na13155 (counterclaims)).

If you are the victim

• If an account holder sues you for a declaration of non-liability, consider first arguing that there is no legal interest. Where you have already been refunded, courts have consistently dismissed such suits (Seoul Central District Court, August 11, 2026, 2025Gadan66813; Seoul Central District Court, May 8, 2024, 2023Gadan5224139; Uijeongbu District Court, Namyangju Branch, July 8, 2026, 2025Gadan5523).
• Your claims are extinguished only to the extent of the refund (Article 12 of the Telecommunications Fraud Refund Act). For the remainder, you may be able to sue the holder for unjust enrichment, but you must prove that the holder knew, or through gross negligence did not know, that the funds were obtained by fraud (Suwon High Court, July 9, 2026, 2025Na12622 (main claim), 2025Na12623 and 2025Na13155 (counterclaims)).
• Apply for relief truthfully. A false application exposes the applicant to liability toward the account holder (Article 11-2 of the Telecommunications Fraud Refund Act).

What does this mean for foreign residents and businesses in IFEZ?

Foreign nationals and foreign-invested companies in the Incheon Free Economic Zone (IFEZ), including Songdo International Business District, Cheongna International City, and Yeongjong International City, can find themselves on either side of these disputes.

• Informal currency exchange or remittance for acquaintances can expose you to an account freeze and, as the Suwon High Court case shows, to an order to repay victims. Avoid accepting funds from senders you cannot identify (Suwon High Court, July 9, 2026, 2025Na12622 (main claim), 2025Na12623 and 2025Na13155 (counterclaims)).
• When selling goods or virtual assets peer-to-peer, keep records of the buyer, the platform, and the escrow or payment trail. Those records decided the outcome in the Seongnam case (Suwon District Court, Seongnam Branch, July 8, 2026, 2026Gadan10288).
• If your company’s account is frozen, act within the objection period rather than relying on a lawsuit against the victim, which several South Korean courts have dismissed (Seoul Central District Court, August 11, 2026, 2025Gadan66813; Seoul Central District Court, June 18, 2026, 2025Gadan109895).

For a related decision on a bank’s liability for voice phishing losses, see Voice Phishing and Bank Liability in South Korea.

Frequently asked questions

This article summarizes publicly available Korean court decisions on declaratory actions brought by holders of accounts frozen after voice phishing reports. It is not legal advice on any particular matter. All decisions discussed are trial or intermediate appellate rulings, and except for the Suwon High Court decision we have not confirmed whether they were appealed. Because objection deadlines are short, please consult Atlas Legal about your specific situation.

About the Author

Soyoung Park | Representative Attorney

Family Law, Inheritance, Construction & Real Estate Disputes

Judicial Research and Training Institute, 33rd Class

Korea University, Department of Law

Atlas Legal | Incheon Songdo, South Korea

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