South Korea Prosecutes First Virtual Asset Manipulation Case Under New Law

• South Korea processed its first virtual asset price manipulation case under the Virtual Asset Act, enforced in July 2024.
• The suspect used purchase, price inflation, and liquidation to profit hundreds of millions won illicitly.
• Financial authorities plan enhanced monitoring, stricter regulations, and revised market structures to combat unfair crypto trading practices.

South Korean financial authorities reported the first case of virtual asset price manipulation investigated under the Virtual Asset Act. The case, announced on January 16, 2025, was processed through the new investigative framework, enforced since July 19, 2024. This process involved virtual asset exchanges reporting abnormal transactions, followed by thorough investigations by financial authorities, deliberations by the Virtual Asset Market Investigation Deliberation Committee, and resolution by the Financial Services Commission (FSC).

Price Manipulation Strategy Uncovered

The suspect employed a short-term price manipulation tactic in three stages: advance purchase, price inflation, and liquidation. Financial authorities disclosed that the individual initially acquired a substantial quantity of a specific virtual asset. The suspect artificially increased its price and trading volume by executing rapid buy orders, simulating high market demand.

This strategy deceived market participants and led to abrupt price increases. Within approximately ten minutes, the suspect sold the holdings at inflated prices, completing the manipulative cycle. This activity destabilized previously stable assets and generated illicit profits amounting to several hundred million won over one month.

Financial Authorities Respond to Market Abuse

The financial authorities emphasized the risks posed by sudden price surges and subsequent crashes in the virtual asset market. Increased trading volumes and volatility have raised concerns about the prevalence of unfair trading practices. In response, authorities are enhancing their investigative systems and urging exchanges to strengthen transaction monitoring.

The FSC has also committed to improving market structures, with plans to revise listing and disclosure frameworks. These measures aim to mitigate market manipulation risks and protect investors.

Rising Crypto Adoption Spurs Regulatory Measures

South Korea has experienced a surge in cryptocurrency adoption, fueled by recent policy developments. Increased market activity has prompted regulators to adopt stricter oversight to safeguard the integrity of the virtual asset ecosystem.

This week, the FSC convened its second Virtual Asset Committee meeting to discuss new investor protection laws. The Vice Chairman, Kim So-young, confirmed progress on corporate account approvals after extensive reviews by subcommittees and task forces. A formal policy decision is expected soon, reflecting the country’s proactive approach to addressing emerging challenges in the virtual asset market.