South Korea indicts suspects in first crypto pump and dump case

South Korean authorities have indicted individuals for engaging in unfair cryptocurrency trading practices, marking the first enforcement action under the newly implemented Virtual Asset User Protection Act.

On January 16, the Financial Services Commission (FSC) announced the case, which involves allegations of price manipulation through a scheme commonly known as a "pump and dump."

This law, effective since July 2024, mandates local virtual asset service providers (VASPs) to report suspicious transactions and investigate unfair trading activities.

The FSC reported that the suspects manipulated cryptocurrency prices within short time frames, often completing their schemes in about 10 minutes.

This allowed them to earn hundreds of millions of Korean won over a month by artificially inflating prices before rapidly selling off their assets.

“The suspect’s price manipulation process was often completed within 10 minutes. During this process, the prices of virtual assets in a sideways trend showed a pattern of sharp rise and a subsequent sharp decline,” stated the regulator.

As transaction volumes increase, concerns regarding unfair trading practices have prompted the FSC to enhance its investigation systems and promote monitoring by VASPs.

The commission is also considering improvements to market structures to ensure transparency and fair trading.

This development coincides with ongoing discussions in South Korea regarding corporate crypto investment.

Following a recent Virtual Asset Committee meeting, the FSC is expected to decide on punitive measures against major local exchange Upbit for potential Know Your Customer violations.  

Additionally, the report comes amid progress in a long-running court case involving Lee Jung-hoon, former chair of Bithumb.

On January 16, Lee was acquitted in an appeal trial related to a significant customer data breach that occurred in 2017, affecting 31,000 accounts and resulting in nearly $7 million in stolen funds.