First Application of the New Investor Protection Law The South Korean government announced its first enforcement action against unfair trading practices under the Virtual Asset User Protection Act, the main development for further regulation of the cryptocurrency market in the country. The Act had been passed in July 2024, requiring Virtual Asset Service Providers to report suspicious transactions and check the possibility of manipulative acts for market fairness. On January 16, the Financial Services Commission announced that suspects were indicted for the fraudulent manipulation of the prices of cryptocurrency. This marked the first case under the new law. The suspects reportedly took advantage of market trends, moving prices in their favor with a strategy commonly called a pump-and-dump. Manipulation in Minutes Authorities said the suspects manipulated cryptocurrency prices in 10-minute units. The fraudsters had placed several purchase orders to give a false impression of rising demand, thus pushing up prices. And when the prices reached a certain level, they sold their holdings to cause a sharp market decline. The reported manipulative scheme had enabled them to earn hundreds of millions of Korean won in just one month. The process of price manipulation was often completed in 10 minutes, resulting in sharp rises and falls in prices,” the FSC said in a statement. Strengthening Oversight The FSC has promised to enhance its surveillance mechanisms and become more transparent in the crypto space as unfair trade practices continue to gain momentum. It is nudging VASPs to take a proactive approach in identifying suspicious transactions and complying with higher regulatory requirements. The commission is also considering structural market reforms that will promote a fairer trading platform. Broader Crypto Market Developments The case comes out as South Korea continues to sail through the maze of the cryptocurrency market. The authorities have been discussing corporate crypto trading accounts, in what is believed to be an effort to gradually introduce businesses into the space. Meanwhile, the FSC has also been probing one of the country’s largest crypto exchanges, Upbit, allegedly over violations of KYC. High-Profile Crypto Cases Continue South Korea, however, stays one of the most active legal jurisdictions for cryptocurrencies : On January 16, the ex-chair of Bithumb, Lee Jung-hoon, was acquitted in an appeal trial related to the data breach in 2017 that had 31,000 accounts and the theft of nearly $7 million in funds through user accounts. As regulatory measures get more and more stringent, one can see how much South Korea is committed to having a safe and transparent cryptocurrency market.
