South Korea’s Financial Services Commission on Sept. 23 decided at its 16th regular meeting to refer suspects in four virtual-asset unfair trading cases to investigative authorities. One of the cases involved executives at a token-issuing company who allegedly hired professional traders to trade among a group of accounts, generating volume that made up more than 90% of the token’s total turnover.
The other three cases involved ultra-short-term price manipulation carried out with API-based automated trading programs. In two of those cases, the suspects were brothers. According to materials released by the commission, authorities did not disclose the names of the tokens or exchanges involved, and did not disclose the amount of illicit gains tied to the four cases.
Volume inflation was used to pursue listings on larger exchanges
The commission said the company’s token had repeatedly applied for listings on major South Korean exchanges but was rejected because of insufficient trading volume and other reasons. The company then listed the token on a mid-sized exchange with lower listing requirements and used wash trading to inflate turnover.
That fabricated volume served two purposes. First, it made the token appear to satisfy exchange requirements for maintaining a listing. Second, it was used as part of the qualification process when applying for listings on other major exchanges. Based on the regulator’s description, trading volume was one of the criteria used by those exchanges to review both listing applications and continued listing status. The company falsified that metric. Financial authorities said the scheme lasted for several months and made ordinary investors believe the token was actively traded.
The company allegedly hired professional traders commonly referred to as market makers and used borrowed-name accounts along with accounts belonging to multiple employees so the accounts could trade with one another. The token’s issuing foundation was registered in an overseas tax haven and existed only as a paper company, while the actual issuance and operations were handled by a company established in South Korea by the people involved. Some of the core figures listed in the white paper for the foundation could not be identified, while others were fictitious, according to the commission.
The parties reported to investigators included the operating company that effectively acted as the issuing foundation, as well as the company’s beneficial controller, chief executive officer and others.
Brothers used APIs to create an order-book “flickering effect”
In the first and second cases, the suspects were brothers who used the same method across multiple tokens. They first placed high-priced limit buy orders and quickly bought the tokens they intended to push higher. They then used API programs to repeatedly submit small market buy and market sell orders in identical sizes.
Because those small trades were executed rapidly and continuously, the order book kept moving and appeared highly active. The commission described this as an order-book “flickering effect.” At the same time, the two manually placed high-priced buy orders through the web interface to push prices up. Once the target price was reached, they rapidly sold out using low-priced sell orders and captured the spread.
One suspect also used accounts in other people’s names, in addition to his own account, to avoid exchange limits on the number of API orders. He had accumulated large positions in dozens of tokens that were already volatile before the manipulation. He then used his own account to place high-priced buy orders while using other accounts to conduct high-frequency small market trades, creating the appearance of active trading. Sell orders had already been placed at high prices in advance. As the price was pushed upward, those orders were filled one after another, allowing the suspect to unwind his holdings during the run-up.
About 30 cases referred in two years under the law
South Korea’s Virtual Asset User Protection Act took effect on July 19, 2024, bringing unfair trading in the virtual-asset market under criminal punishment. In July, the Financial Services Commission released enforcement results for the law’s second anniversary. As of July 20, 2026, authorities had completed investigations into about 40 cases and referred about 30 of them to investigative agencies, involving 25 suspects.
The average illicit profit in those cases was about 1.4 billion won, or roughly $1.03 million based on the Sept. 25 exchange rate cited in the report. Under the law, illicit gains below 500 million won are punishable by at least one year in prison. Gains between 500 million won and 5 billion won carry at least three years, and gains above 5 billion won carry at least five years. Over the past two years, eight cases fell in the 500 million won to 5 billion won range, and one exceeded 5 billion won.
Regulator flags sudden volume spikes and single-exchange concentration
The commission said tokens with historically low trading volume that suddenly post simultaneous price and volume surges without a clear reason may involve artificial trading, especially when turnover is concentrated on a single exchange. For tokens whose issuing foundations are registered in overseas tax havens, investors were urged to check the actual operating entity and the circulating supply inside and outside South Korea before investing. Financial authorities said they will strengthen monitoring of similar trading patterns.