South Korea exposes 40+ crypto manipulation probes as new law hits two-year mark
South Korea’s financial watchdog says it has investigated more than 40 cases of suspected unfair crypto trading during the first two years after the Virtual Asset User Protection Act came into force on July 19, 2024.
Key figures and actions
- The Financial Services Commission (FSC), chaired by Lee Eog-won, reported that authorities have flagged over 40 alleged incidents involving market manipulation and other fraudulent trading.
- More than 30 of those cases were reported or referred to investigative agencies; 25 suspects have been identified to date.
- Average unlawful gains per case were about 1.4 billion KRW (roughly $940,000).
What the law does
Lee said the Virtual Asset User Protection Act brought Korea’s previously unregulated crypto market into a formal legal framework and set up safeguards for users. The law requires virtual asset service providers to:
- segregate customer assets from company holdings,
- keep user deposits with banks, and
- submit to regulatory inspections.
It also explicitly outlaws and empowers regulators to act against insider trading, wash trading, market manipulation and other abusive practices.
Enforcement in practice
Regulators have already used the new powers in multiple cases. This month the FSC referred two suspected market-manipulation matters to prosecutors — one involving an alleged trader who accumulated nearly half of a token’s circulating supply and sold into rising demand, a pattern regulators warn can cause extreme price and volume swings in low-liquidity tokens.
The FSC says enforcement has evolved beyond isolated investigations to target short-term price manipulation and trading patterns that distort markets. Lee added that Korea will beef up surveillance, investigation and monitoring systems using artificial intelligence and target “high-risk” areas more closely. The FSC has not published a comprehensive public list of all 40+ cases or disclosed the status of every referral.
Wider regulatory moves
Alongside prosecutions, Korea is expanding its regulatory architecture for digital assets:
- The government is considering bringing cryptocurrencies and other digital assets under a state asset management framework, extending rules now used for traditional state holdings.
- The Financial Intelligence Unit has referred roughly 40 unregistered crypto operators to law enforcement and warned users about the risks of platforms that operate outside Korea’s registration system.
Bottom line
Two years after South Korea’s first dedicated crypto user-protection law took effect, regulators are actively using its tools to pursue alleged market abuse and build stronger monitoring capabilities. For investors and exchanges, the message is clear: the market is being pulled into a stricter compliance and enforcement regime — and surveillance powered by AI is on the horizon.
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