South Korea issues first sentence for crypto market manipulation

Key points:

• A South Korean court sentenced the head of a crypto company to three years in prison for manipulating a token’s price.
• The case marks the first application of the country’s new law protecting crypto asset users.
• Authorities continue to tighten regulation of the cryptocurrency market.

A South Korean court has handed down the first sentence under the country’s new crypto law, convicting the CEO of a digital asset management firm for market manipulation.

CEO Jeong Hwan Lee was sentenced to three years in prison for artificially inflating the price of the ACE token. According to the court, he earned roughly 7.1 billion won (about $4.9 million) through the scheme. The court also imposed a 500 million won fine and ordered the confiscation of part of the illegal proceeds. Lee was not taken into custody immediately, with the court citing his conduct during the trial.

How the Manipulation Scheme Worked

Investigators found that between July and October 2024, Lee used automated trading software to generate fake trades and sharply boost trading volume. Before the scheme began, the token’s average daily volume was around 160,000 units. The following day, it surged to 2.45 million units, with 89% of the activity linked to accounts connected to Lee.

The court said the actions seriously undermined investor confidence and disrupted fair price discovery in the crypto market. A former company employee, Min-chul Kang, received a two-year suspended sentence with a three-year probation period.

While the court partially dismissed claims regarding the total amount of illegal profit due to insufficient evidence, the case still stands as the first precedent under the Virtual Asset User Protection Act, which came into force in July 2024.

South Korean authorities are now preparing the next phase of regulation through the Digital Asset Framework Act, which could introduce additional rules for the crypto industry, including regulations on stablecoins and initial coin offerings (ICOs).