South Korean Authorities Charge Suspects in Cryptocurrency Pump-and-Dump Scheme Under New Investor Protection Law

On January 16, 2025, South Korean financial authorities announced the first indictment under the Virtual Asset User Protection Act, enacted in July 2024. This act aims to safeguard cryptocurrency traders from unfair practices, with authorities now cracking down on illicit market manipulation.

The case involves suspects accused of artificially inflating cryptocurrency prices in rapid intervals, often within 10 minutes, enabling them to profit by dumping large quantities of tokens. The scheme, known as a "pump and dump," violated South Korea’s investor protection laws, and the perpetrators are believed to have earned millions of Korean won over the course of a month.

Under the new law, local virtual asset service providers (VASPs) are required to report irregular transactions and investigate suspicious trading activities. This move comes as the country’s authorities seek to combat the rising tide of crypto market manipulation as trading volumes continue to grow.

The Financial Services Commission (FSC) emphasized that its investigation will focus on enhancing surveillance mechanisms and improving market transparency. The FSC also intends to hold additional meetings to discuss corporate crypto trading and potential punitive actions for the local exchange, Upbit, which is under scrutiny for potential breaches of Know Your Customer regulations.

Meanwhile, South Korea continues to deal with high-profile cases in the cryptocurrency sector. In the case of Bithumb’s former chairman, Lee Jung-hoon, he was recently acquitted in an appeal trial concerning a 2017 customer data breach. The leak, which affected over 31,000 users, led to nearly $7 million in stolen funds.