South Korean authorities have charged suspects for unjust crypto trading, which involves artificial price inflation and subsequent token disposal, also known as a pump and dump.
The South Korean financial authorities have implemented measures to combat purportedly unjust cryptocurrency trading practices in accordance with the nation’s investor protection regime.
In July 2024, the Financial Services Commission (FSC) of South Korea reported the initial instance of discriminatory crypto trading practices under the Virtual Asset User Protection Act.
The Virtual Asset Protection Act of South Korea mandates that local virtual asset service providers (VASPs) disclose any anomalous crypto transactions and conduct an investigation into any unjust trading patterns.
Authorities charged suspects in the first reported case under the act for allegedly manipulating prices in brief intervals of approximately 10 minutes, resulting in the earning of hundreds of millions of Korean won over the course of one month.
The perpetrator, as per the FSC, violated South Korea’s crypto investor protection laws by placing frequent buy orders to elevate the price of a cryptocurrency before discarding a substantial quantity of assets that were purchased in advance. This practice is referred to as a “pump and dump” in the crypto industry.
“The suspect frequently completed the price manipulation procedure in under 10 minutes. The prices of virtual assets in a sideways trend exhibited a pattern of rapid rise and subsequent sharp decline during this process,” the regulator stated.
The FSC intends to further improve investigation systems, promote monitoring by VASPs, and consider enhancements to market structure to ensure transparency and an equitable trading order in response to the increasing concerns over unjust trading as transaction volumes increase.
In the wake of the second Virtual Asset Committee meeting on January 15, South Korea is rapidly approaching the potential approval of corporate crypto trading accounts. This report is timely.
The FSC is also slated to convene a meeting to determine disciplinary actions against Upbit, a prominent local exchange that was reportedly found guilty of at least half a million possible Know Your Customer violations in 2024.
Lee Jung-hoon, the former chief of the main local crypto exchange, Bithumb, is also believed to be the actual proprietor of the platform. South Korean authorities have been progressing in a long-running court case involving him.
Lee was purportedly cleared in an appeal trial related to a large-scale customer data violation on Bithumb on January 16. In 2017, a data breach occurred that affected 31,000 user accounts on Bithumb, allegedly resulting in the theft of nearly $7 million in user funds.
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