South Korea’s Financial Services Commission (FSC) said it is preparing to introduce an artificial intelligence-based virtual asset oversight system after reporting more than 30 crypto-related cases to judicial authorities over the past two years. The regulator said its enforcement work has focused on short-term manipulation and pump-and-dump activity that disrupt market order, with price manipulation making up the majority of reported cases.
According to the FSC, authorities have completed about 40 investigations into unfair trading in virtual assets since the Virtual Asset User Protection Act took effect two years ago. More than 30 of those cases were referred or reported to judicial authorities, and most involved price manipulation.
Cases included API-key abuse, issuer-linked schemes and whale activity
The FSC said regulators uncovered several forms of misconduct, including short-term manipulation carried out through borrowed API keys, cases in which project issuers cooperated in price manipulation, and large-scale whale manipulation tied to coordinated trading with overseas exchanges.
Some fraud-related cases involved project teams spreading false information on social media to attract investors to buy tokens. Authorities also cited manipulative arbitrage that exploited price interactions between USDT and BTC markets on exchanges.
25 suspected violators transferred to judicial authorities
So far, South Korean regulators have transferred 25 suspected violators to judicial authorities. Average illegal profit per case was about 1.4 billion won.
Among the cases identified, eight generated illegal gains between 500 million won and 5 billion won, while one case exceeded 5 billion won. Because short-term manipulation showed clear recurring patterns, the average case involved about eight different tokens.
Two cases have already led to penalties
In efforts to recover illicit proceeds, financial regulators have imposed fines in two cases so far, including one fraud trading case and one price manipulation case. The penalties amounted to 125% to 165% of the illegal gains.
Next steps center on AI monitoring and account freezes
The FSC said it plans to strengthen market surveillance by introducing an AI-based virtual asset regulatory system. The planned tools include real-time market monitoring, second-level analysis of price manipulation, and automatic identification of suspicious accounts and trading ranges, with the goal of improving early detection of abnormal trading.
South Korean regulators also plan to add an account-freezing mechanism for illegal profits, along with a reporting and reward system for unfair trading, in future digital asset legislation. The report was cited by KBS.