First Unfair Trading Case Reported Under South Korea’s Virtual Asset User Protection Act

The Rapid “Pump and Dump” Scheme

According to the FSCs investigation, the case involves a suspect who manipulated cryptocurrency prices within a short period to reap significant profits. The suspect employed a classic “Pump and Dump” strategy:

1. Price Manipulation Tactics: The suspect placed repeated buy orders within a mere 10-minute window, causing a sharp price surge that lured other investors into following the trend.

2. Quick Sell-Off for Profit: Once the price peaked, the suspect quickly sold a substantial amount of previously acquired low-cost crypto assets, securing considerable profits.

The FSC emphasized in its statement that this case violated investor protection provisions under the Virtual Asset User Protection Act. Under the law, Virtual Asset Service Providers (VASPs) are responsible for monitoring irregular trading activities and reporting suspicious transactions proactively.

Moving forward, the FSC plans to strengthen its investigative systems, enhance market transparency, and encourage VASPs to improve transaction monitoring efforts. Additionally, South Koreas regulatory authorities aim to reform market structures further, exploring measures to prevent similar schemes. These include improving compliance requirements for exchanges and increasing penalties for violations.

Raising Compliance Standards in the Korean Crypto Market

With the implementation of the Virtual Asset User Protection Act, compliance requirements in South Korea are becoming increasingly stringent. While this bolsters investor confidence, it also sets higher self-regulation standards for market participants.

The FSC stated its commitment to fostering a balance between regulation and innovation, ensuring long-term development in the cryptocurrency market. It pledged to continue working closely with industry stakeholders to achieve this dual goal.