South Korea's financial authorities have investigated over 40 crypto market manipulation cases since the country's user-protection law took effect in July 2024, according to reports from the Financial Services Commission. The cases exposed 25 suspects across two years of enforcement and resulted in more than 30 confirmed cases being referred to investigative agencies for prosecution. The Financial Services Commission's Chairman shared these figures to mark the law's second anniversary, demonstrating the comprehensive nature of regulatory enforcement efforts. As per Lee Eog-won, Chairman of the Financial Services Commission, 30 of these cases have been forwarded to investigative authorities for further legal action. The inquiries began after the Virtual Asset User Protection Act took effect in July 2024, with the commission reporting that cases involved activities such as market manipulation, wash trading and fraudulent crypto transactions.
The investigations revealed significant financial losses, with average illicit gains reaching approximately ₹1.4 billion per case, equivalent to roughly $940,000 according to the latest data from the Financial Services Commission. The enforcement actions included eight cases ranging from ₹500 million to ₹5 billion, and one case exceeding ₹5 billion. Regulators imposed penalties of 125% to 165% of illicit gains in two cases, with authorities framing these results as a foundation for rebuilding market trust. The Financial Services Commission did not provide details on individual cases or the identities of the 25 suspects, but reported the average unlawful profit figures as investigations continue through South Korea's legal system.
South Korea passed the Virtual Asset User Protection Act on July 19, 2024, providing regulators with dedicated tools to combat abuse in the crypto market. The Financial Services Commission established a specialized investigation unit and later added digital forensics capabilities to refine the penalty surcharge system operation. This regulatory buildout resulted in approximately 40 completed investigations and represents the systematic approach to market protection. Under the current legal framework, virtual asset service providers operating in South Korea are subject to strict operational guidelines, with platforms legally required to segregate user deposits and digital assets from their own corporate holdings, storing client funds securely within traditional banking institutions. The law also broadened the FSC's powers to inspect and supervise virtual asset service providers and to pursue suspicious activity that harms users or market integrity.
Regulators signaled continued strengthening efforts, planning to introduce account and bank-account payment suspension powers to block hidden proceeds, as reported by the Financial Services Commission. A reporting and reward system for unfair trading is under review for second-phase legislation, with authorities intending to expand AI-based market surveillance alongside these measures. The Financial Services Commission aims to deploy artificial intelligence to improve its market surveillance and monitoring systems, allowing investigators to proactively identify suspicious trading patterns and mitigate risks in highly volatile market segments. In a post marking the law's second anniversary, FSC Chair Lee Eog-won outlined plans to enhance market surveillance investigation and monitoring systems based on AI, writing that the commission will proactively respond to high-risk areas as both domestic and cross-platform trading practices are subject to scrutiny under the new rules.
