국문 KR 영문 EN

The Financial Services Commission and the Financial Supervisory Service have released the results of their first two years of enforcement under Korea’s Virtual Asset User Protection Act.

As of July 20, 2026, the authorities had completed investigations into approximately 40 cases and referred or reported around 30 cases to investigative authorities. A total of 25 individuals were identified as suspects, with average alleged unlawful gains of approximately KRW 1.4 billion per case.
 

Enforcement Results Under Korea’s Virtual Asset User Protection Act

Korea’s Virtual Asset User Protection Act took effect on July 19, 2024. The Act prohibits unfair trading activities in the virtual asset market, including the misuse of material non-public information, market manipulation, and fraudulent trading practices.

Among the approximately 30 cases referred or reported to investigative authorities, most involved suspected market manipulation. The authorities also identified several fraudulent trading cases involving false or misleading information distributed through social media.

The key enforcement figures announced by the Korean financial authorities include:

▪️ Approximately 40 investigations completed
▪️ Approximately 30 cases referred or reported to investigative authorities
▪️ 25 individuals identified as suspects
▪️ Average alleged unlawful gains of approximately KRW 1.4 billion per case
▪️ An average of approximately eight virtual assets involved per case

A referral or report does not mean that a criminal conviction has been entered. It means that the financial authorities identified suspected violations and transferred the matter to investigative authorities. Some of the announced cases remain under criminal investigation or are currently being tried in court.
 

Market Manipulation Methods Identified by Korean Regulators

Manipulating Price-Ranking Systems

One method involved concentrating orders at specific times when a trading platform’s price-change rankings were reset.

By pushing a virtual asset into the list of top-performing assets, traders could attract additional buying interest and then sell their existing holdings at higher prices.

A large purchase made at a particular time does not automatically constitute market manipulation. However, regulators may examine whether the orders were intended to influence rankings, attract other investors, and facilitate the subsequent disposal of previously held assets.

Exploiting Temporary Suspension of Deposits and Withdrawals

Another method involved taking advantage of situations in which deposits and withdrawals of a particular virtual asset were temporarily suspended on one or more exchanges.

When assets cannot be transferred to or from the exchange, the price on that exchange may become temporarily disconnected from prices elsewhere. Traders may attempt to increase the internal exchange price through concentrated purchases and then sell their holdings at the inflated price.

A deposit or withdrawal suspension is not itself evidence of misconduct. The legal issue is whether a person deliberately exploited the restricted market environment to create an artificial price and induce trading by other users.

High-Frequency and Deceptive Orders Using APIs

An application programming interface, or API, allows orders to be submitted automatically through trading software.

The authorities identified cases in which API keys and multiple accounts were allegedly used to submit high-frequency buy and sell orders, including orders that were not intended to be genuinely executed.

In one case, the authorities found that automated orders and deceptive bids were allegedly used to increase the market price before virtual assets associated with the issuing foundation were sold at higher prices.

Using an API or automated trading system is not unlawful by itself. The key question is whether the orders reflected a genuine intention to trade or were designed to create a false impression of market demand and induce other users to buy or sell.

False Social Media Statements and Meme Coin Trading

The authorities also identified a case in which persons connected to a meme coin allegedly purchased the asset in advance, published false information through social media, and then sold their holdings after additional buyers entered the market.

Promoting a virtual asset project, exchange listing, partnership, or business plan is not automatically unlawful.

However, publishing nonexistent investment arrangements, partnerships, or development plans as if they were true—and using that information to sell previously acquired assets—may constitute fraudulent trading under Korean law.
 

How Is Legitimate High-Volume Trading Distinguished from Market Manipulation?

Purchasing an asset before its price rises and later selling it at a profit does not, by itself, establish market manipulation.

Korean financial and investigative authorities generally examine the purpose and overall pattern of the trading activity rather than viewing each order in isolation.

Relevant factors may include:

▪️ Whether repeated high-priced purchases or deceptive orders were submitted
▪️ Whether there was a genuine intention to execute the orders
▪️ Whether multiple accounts acted under common instructions
▪️ Whether the accounts were connected to an issuing foundation or major holder
▪️ Whether significant holdings were sold immediately after the price increased
▪️ Whether social media posts were closely connected to the timing of sales
▪️ Whether orders across Korean and overseas exchanges were coordinated

Even where accounts or API keys were registered in another person’s name, investigators may examine who actually controlled the trading, who gave the instructions, and who ultimately received the profits.
 

Criminal Penalties and Administrative Surcharges

Virtual asset market manipulation and fraudulent trading may result in both criminal penalties and administrative surcharges intended to recover unlawful gains.

According to the financial authorities’ announcement, the statutory minimum term of imprisonment increases according to the amount of unlawful gains:

▪️ Less than KRW 500 million: imprisonment for at least one year
▪️ KRW 500 million to less than KRW 5 billion: imprisonment for at least three years
▪️ KRW 5 billion or more: imprisonment for at least five years

The actual penalty may vary depending on the conduct involved, the calculation of unlawful gains, the level of participation, and whether additional fines, confiscation, or collection orders are imposed.

In the announced enforcement results, administrative surcharges equivalent to approximately 125% to 165% of the unlawful gains were imposed in one fraudulent trading case and one market manipulation case.

A market manipulation matter may therefore proceed beyond an exchange account restriction. It may lead to regulatory investigation, referral or reporting to investigative authorities, criminal investigation, prosecution, trial, and a separate administrative surcharge proceeding.
 

AI-Based Monitoring and Future Regulatory Measures

Korean financial authorities have introduced AI-based market surveillance and investigation systems capable of conducting real-time monitoring, analyzing orders on a second-by-second basis, and automatically identifying potentially suspicious accounts and trading periods.

Korean virtual asset exchanges have also strengthened their continuous monitoring systems. Exchanges may report suspicious trading to financial or investigative authorities and may issue warnings or restrict orders when potentially abusive trading patterns are repeatedly detected.

The authorities are also considering whether to include the following measures in the proposed second-stage Digital Asset Act:

▪️ Freezing accounts and financial accounts to prevent the concealment of unlawful gains
▪️ A reporting and reward system for the early detection of unfair virtual asset trading

These measures were under consideration at the time of the announcement and should not be treated as fully implemented rules.
 

Responding to a Market Manipulation Investigation in Korea

A person who receives an account restriction or a request for an explanation from a Korean virtual asset exchange should first identify the specific orders and trading periods under review.

Where automated trading or market-making activities were conducted, relevant evidence may include:

▪️ Order, execution, and API usage records
▪️ Automated trading settings and documented trading strategies
▪️ The relationship between the registered account holder and the actual operator
▪️ Communications with the issuing foundation or major asset holders
▪️ Transfers between personal wallets and virtual asset exchanges
▪️ The basis and circumstances for social media statements
▪️ Records showing how trading profits were received and distributed

Automated trading or high-volume trading does not automatically establish market manipulation.

However, simply stating that the activity was a legitimate investment may not be sufficient. The trading purpose, genuine intention to execute orders, relationship between accounts, and ultimate recipient of the profits should be explained through objective records.

Decent Law Firm advises clients on exchange inquiries, investigations by Korean financial authorities, police and prosecution proceedings, and criminal trials involving alleged virtual asset market manipulation and fraudulent trading.



This content is provided for general informational purposes only and does not constitute legal advice for any individual matter.