South Korea’s Financial Services Commission (FSC) says it has investigated more than 40 cases of alleged unfair conduct in the crypto market over the past two years, ranging from market manipulation to fraudulent trading activity. The regulator also claims it has identified 25 suspects connected to those matters after the Virtual Asset User Protection Act took effect in July 2024.
FSC Chair Lee Eog-won shared the figures in a post on X, noting that 30 of the cases have been reported to or referred to investigative authorities. He said the average unlawful gains in the matters reviewed were roughly 1.4 billion Korean won (about $940,000).
Key takeaways
- The FSC reports probing 40+ unfair trading cases over two years, including manipulation and fraud.
- After the Virtual Asset User Protection Act began in July 2024, Lee said authorities identified 25 suspects tied to 30 reported or referred cases.
- Lee estimated average unlawful gains of about 1.4 billion won per case.
- The law strengthens the FSC’s ability to supervise and inspect crypto service providers (VASPs), with additional focus on high-risk trading behavior.
- The regulator says it plans to expand market surveillance using AI-assisted monitoring and targeted responses.
Why the numbers matter for South Korean crypto markets
The FSC’s update is significant because it frames crypto enforcement not as isolated incidents, but as an ongoing investigative pipeline. By connecting the latest suspect and case counts to the start of the Virtual Asset User Protection Act, the regulator is effectively signaling that the post-legislation framework is now producing measurable enforcement outcomes.
For traders and users, the practical implication is that conduct previously handled under looser or less specific oversight is increasingly being treated as compliance and supervision issues—especially for activity that regulators typically view as harmful to market integrity, such as wash trading and insider-related behavior.
What the Virtual Asset User Protection Act requires from VASPs
At the core of the regulator’s message is how the July 2024 law changes the relationship between crypto platforms and investors. According to Cointelegraph reporting, the Virtual Asset User Protection Act is designed to protect users who buy and store crypto assets through virtual asset service providers (VASPs).
Under the framework described by the FSC, VASPs are required to separate client deposits and virtual assets from the company’s own holdings. Client deposits are held in banks, creating a structural distinction intended to reduce the risk that user funds could be mixed with corporate assets.
The statute also specifically targets market integrity issues, aiming to deter and address illicit practices such as insider trading, wash trading, and market manipulation. This, in turn, broadens the FSC’s oversight remit and gives the commission more authority to supervise and inspect VASPs.
Focus on market surveillance and enforcement capacity
In the same X post, Lee said the FSC will keep enhancing its market surveillance and investigation systems, explicitly citing the use of AI to support monitoring. He also indicated that authorities will “proactively respond to high-risk areas,” a phrase that suggests the regulator is increasingly focusing resources where it expects the most misconduct risk rather than reacting only after damage has occurred.
This matters because enforcement outcomes often depend not just on legal authority but on the ability to detect patterns in trading behavior at scale. The FSC’s emphasis on AI-based monitoring aligns with the kinds of tactics it named—wash trading and manipulation are frequently identifiable through transaction and order-flow patterns that can be monitored continuously.
Earlier coverage by Cointelegraph has also noted how South Korea is moving to bring digital assets more firmly within state oversight structures, including steps that extend beyond user-protection provisions. The latest enforcement update fits that broader direction by showing how supervision and investigations are being operationalized.
What investors should watch next
Going forward, the most important signal for market participants is whether the FSC’s investigation pipeline translates into sustained compliance pressure on VASPs—especially around surveillance-heavy practices like wash trading and manipulation. Readers should watch for additional enforcement actions and any expansion of AI-assisted monitoring capabilities, since that is likely to determine how quickly suspicious activity is detected and how consistently it leads to referrals and sanctions.
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