South Korea's Financial Services Commission completed over 40 virtual asset unfair trading investigations and referred 30-plus cases to prosecutors in the two years since the Virtual Asset User Protection Act took effect in 2024. The enforcement targeted market manipulation schemes exploiting crypto-specific trading patterns, with 25 suspects accumulating average illegal profits of 1.4 billion won per case. The crackdown reflects strengthened regulatory oversight under legislation designed to protect retail investors in digital asset markets.
Financial Authorities Report 30+ Cases with 1.4 Billion Won Average Illegal Profit
The Financial Services Commission and Financial Supervisory Service announced July 19 that 30-plus of the 40-plus completed investigations resulted in referrals or notifications to law enforcement. Eight cases involved illegal profits between 500 million and 5 billion won, triggering enhanced criminal penalties of five or more years imprisonment under the Act. One case exceeded 5 billion won in illegal gains. The 25 identified suspects generated average illegal profits of 1.4 billion won per case.
Market Manipulation Tactics Include Racing Horse and Fish-Trap Schemes
Market manipulation accounted for the majority of detected violations. Authorities identified "racing horse" schemes concentrating orders in specific timeframes to induce buying pressure, and "fish-trap" tactics artificially inflating prices during temporary deposit-withdrawal suspensions on exchanges. One case involved API key lending to facilitate manipulation. Regulators also referred a meme coin issuer who spread false information via social media to attract buyers before dumping holdings.
Regulators Credit Enhanced Surveillance and Industry Self-Regulation Efforts
Financial authorities assessed that market surveillance capabilities strengthened over the two-year period, enabling early detection of suspicious trading patterns and rapid investigation completion. Officials noted that industry-level self-regulation efforts expanded, including the establishment of continuous abnormal trading monitoring systems at virtual asset service providers.
Digital Asset Basic Act Proposes Payment Suspension and Whistleblower Rewards
Authorities plan to incorporate additional unfair trading prevention measures into the pending Digital Asset Basic Act (Phase 2 legislation). Proposed mechanisms include account and payment suspension systems to prevent illegal profit concealment, and whistleblower reporting with financial rewards. The Financial Services Commission stated it will deploy all available resources to establish a fair and transparent market order that users can trust, in response to increasingly sophisticated and large-scale unfair trading schemes.
FAQ
How many virtual asset unfair trading cases did South Korean authorities complete investigations on since 2024?
Authorities completed over 40 investigations in the two years since the Virtual Asset User Protection Act took effect in 2024, referring 30-plus cases to prosecutors.
What types of market manipulation did regulators detect in virtual asset markets?
Detected schemes included "racing horse" tactics concentrating orders to induce buying pressure, "fish-trap" schemes exploiting temporary deposit-withdrawal suspensions, API key lending for manipulation, and meme coin fraud using social media to spread false information before dumping holdings.
What enforcement measures are proposed under South Korea's Digital Asset Basic Act?
Proposed measures include account and payment suspension systems to prevent illegal profit concealment, and whistleblower reporting programs with financial rewards for reporting unfair trading.
