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South Korean financial regulators have completed about 40 investigations into suspected unfair crypto trading since the country’s Virtual Asset User Protection Act took effect on July 19, 2024.
The Financial Services Commission and Financial Supervisory Service referred more than 30 cases to investigative authorities and identified 25 suspects during the law’s first two years. The average alleged illicit gain was about 1.4 billion won per case.
Nine Cases Topped 500M Won in Alleged Gains
Eight investigated cases involved alleged gains between 500 million won and 5 billion won, while one case exceeded 5 billion won. Regulators have also imposed financial penalties equal to between 125% and 165% of unlawful gains in two cases.
The sanctions covered one market manipulation case and one fraudulent trading case, according to figures released for the law’s second anniversary.
The 2024 law created criminal penalties and fines for market manipulation, fraudulent transactions and trading based on material nonpublic information. Crypto exchanges must monitor abnormal price and volume movements and immediately report suspicious activity to regulators.
Large Holders and API Orders Featured in Cases
Recent investigations have included alleged pump-and-dump schemes involving concentrated token ownership and automated trading. In one case referred to prosecutors, regulators said a large holder spent tens of billions of won to acquire nearly half of a token’s circulating supply.
The suspect then allegedly pushed up its price on overseas exchanges before selling into demand from South Korean investors.
A separate suspect allegedly used repeated API orders and high-priced limit orders to create buying pressure in a thinly traded local token. Regulators said the trader sold holdings after other investors entered the market.
Regulators Add AI and Interval Analysis Tools
South Korean authorities have expanded their enforcement systems with digital forensics, detailed trading-interval analysis and artificial intelligence tools for detecting suspicious market activity.
The tools are meant to help regulators identify abnormal order patterns, price movements and coordinated trading behavior more quickly.
The enforcement push comes as regulators try to separate ordinary market volatility from conduct that may involve manipulation, fraudulent trading or misuse of material nonpublic information.
Account Freezes and Rewards Remain Proposed Powers
The government plans to seek powers to freeze crypto accounts and bank payments when investigators believe suspects may conceal illegal proceeds.
A whistleblower reporting and reward program is also being considered for the second phase of the country’s digital asset legislation. Those measures are not yet in force.
They must be included in the next digital asset bill and approved by South Korea’s National Assembly before regulators can use them.
