Authorities Target First Crypto Pump-and-Dump Under New South Korean Law

Authorities Target First Crypto Pump-and-Dump Under New South Korean Law

South Korea has taken decisive action under its newly established cryptocurrency regulatory framework, targeting a pump-and-dump scheme in a landmark case. This marks the first instance of enforcement under the Virtual Asset User Protection Act, which came into effect on July 19, 2024.

New Crypto Law in Action: Suspect Accused of Price Manipulation

On Thursday, South Korea’s Financial Services Commission (FSC) and Financial Supervisory Service (FSS) announced that they had reported a suspect accused of manipulating cryptocurrency prices to prosecutors. The case demonstrates the practical application of the Virtual Asset User Protection Act’s regulatory procedures.

The investigation began when cryptocurrency exchanges flagged unusual trading activity. Financial authorities then conducted an in-depth investigation and secured approval from the Virtual Asset Market Investigation and Deliberation Committee before escalating the matter to prosecutors.

Details of the Scheme

The suspect is accused of engaging in a pump-and-dump operation to secure illicit profits. According to authorities, the individual:

• Acquired large amounts of specific cryptocurrencies.

• Executed rapid and repetitive market buy orders to artificially inflate prices and trading volumes.

• Created the illusion of heightened market activity, enticing other investors to buy the asset.

• Sold off their holdings at the inflated price, causing sharp price volatility.

This process, often completed within 10 minutes, resulted in significant price spikes followed by abrupt declines. Preliminary estimates suggest the suspect may have earned several billion won in unjust gains over a month.

Rising Concerns About Market Manipulation

The case highlights growing concerns over unfair trading practices in the cryptocurrency market. Authorities emphasized the risks associated with assets experiencing sudden price and volume spikes, warning investors about the potential for abrupt losses.

Strengthening Market Oversight

South Korea’s financial regulators have reaffirmed their commitment to improving market oversight, including:

• Enhancing surveillance systems.

• Encouraging cryptocurrency exchanges to bolster detection capabilities.

• Considering broader reforms, such as implementing listing and disclosure standards, to ensure fair and transparent markets.

By addressing unfair practices and reinforcing regulatory measures, South Korea aims to create a more secure environment for cryptocurrency investors.