MV Capital - South Korea Probes Over 40 Crypto Manipulation Cases in Two Years

South Korea’s Financial Services Commission has investigated more than 40 instances of unfair trading in digital assets since the Virtual Asset User Protection Act took effect, referring dozens of cases to authorities as regulators strengthen oversight

Regulatory Enforcement Gains Momentum

South Korea’s financial authorities have examined more than 40 cases of suspected unfair trading practices in the cryptocurrency market over the past two years. These probes encompass market manipulation, fraudulent trading, and related misconduct, according to statements from the Financial Services Commission.

The developments were highlighted by FSC Chair Lee Eog-won in connection with the second anniversary of the Virtual Asset User Protection Act, which entered into force in July 2024. Under this framework, 30 cases have been reported or referred to investigative agencies, resulting in the identification of 25 suspects.

Today marks the second anniversary of the enactment of the ‘Virtual Asset User Protection Act.’ It was a meaningful time that brought the virtual asset market, which was outside the institutional framework at the time, into the fold of the law and created an opportunity to establish a user protection system for virtual assets.Lee Eog-won, FSC Chair

Scale of Alleged Gains and Common Practices

Authorities estimate that the average unlawful gains from the reviewed cases amounted to approximately 1.4 billion Korean won, equivalent to about $940,000. The investigations target activities such as insider trading, wash trading, and other forms of market manipulation that undermine market integrity.

The Virtual Asset User Protection Act introduced specific obligations for virtual asset service providers, commonly known as VASPs. These entities must maintain clear separation between client deposits and virtual assets and their own corporate holdings. Customer funds are required to be held in banks, reducing risks associated with potential commingling or platform failures.

Expanded Oversight and Future Monitoring Plans

The legislation has significantly broadened the FSC’s authority to supervise and inspect VASPs. Regulators are now equipped to address illicit trading behaviors more directly, moving the previously less-regulated sector into a structured legal environment focused on user safeguards.

Lee Eog-won emphasized ongoing efforts to bolster detection capabilities. The commission plans to advance market surveillance, investigation, and monitoring systems through the integration of artificial intelligence, with a focus on proactively addressing high-risk areas in the crypto ecosystem.

We will continue to enhance market surveillance investigation and monitoring systems based on AI, and proactively respond to high-risk areas.Lee Eog-won, FSC Chair

This enforcement activity reflects South Korea’s broader push to integrate digital assets within established regulatory structures while maintaining vigilance against practices that could harm investors and distort markets.