South Korea investigates two cases of cryptocurrency market manipulation

Key points:

• South Korea’s Financial Services Commission (FSC) has referred two cases of cryptocurrency market manipulation involving artificial inflation of prices and trading volumes to law enforcement agencies.
• In the first case, the perpetrators used fictitious orders to create the illusion of price growth, and in the second, they used trading bots and APIs to inflate activity.
• The FSC warned investors about the risks of sharp price jumps for illiquid tokens and reminded them of the penalties for using unfair trading practices.

The South Korean Financial Services Commission (FSC) has referred two cases related to cryptocurrency market manipulation to law enforcement agencies.

According to the investigation, the suspects bought up tens of billions of won worth of cryptocurrency in advance and then repeatedly placed buy orders at inflated prices, using hundreds of billions of won.

First case

In the first episode, the participants in the scheme artificially raised the value of the cryptocurrency by placing buy orders at inflated prices. They then placed sell orders at slightly higher prices and conducted fictitious transactions to push the price to the desired level.

The Financial Supervisory Services discovered these transactions during routine market monitoring.

Unsuspecting investors accepted the price increase as natural and began actively buying the token, which allowed the attackers to sell the assets at a profit. According to the FSC, they illegally earned tens of billions of won in this way.

Second case

In the second case, the suspects used an API for automated trading to artificially increase trading volume. They placed dozens of orders to buy and sell certain cryptocurrencies several times per second, creating the appearance of high activity.

In addition, they manually placed buy orders at inflated prices to create the illusion of rising prices.

The FSC noted that the participants in the scheme deliberately manipulated the exchange interface, knowing that the flashing red line on the chart is perceived by traders as a signal of active buying. With each price change, it indicated an increase in the value of a particular token, amplifying the effect.

Warning to investors

The FSC has urged investors to be cautious if the price of an illiquid cryptocurrency rises rapidly or trading volume increases sharply. Such spikes often end in a sharp price collapse.

The FSC also warned that the use of unfair practices — such as artificially creating interest in an asset or manipulating prices through large orders — will result in fines and sanctions under the Virtual Asset User Protection Act (VAUP).

Legislative measures

On November 4, the FSC announced that the government had approved amendments to the Enforcement Decree of the Special Act on Remedy for Damage. The changes are aimed at increasing the responsibility of financial companies and preventing customer losses related to financial fraud.