Crypto Trading Under Scrutiny: South Korea Sees 40 New Investigations

South Korean regulators have opened investigations into more than forty cases of suspicious crypto trading activity over the past two years. The probe, led by the Financial Services Commission (FSC), targets a range of unfair practices such as market manipulation and fraudulent exchanges.

• 30 cases have been formally reported or forwarded to investigative bodies.
• Since the Virtual Asset User Protection Act (VAUPA) entered force in July 2024, authorities have identified 25 individuals suspected of wrongdoing.
• The average illegal profit from these schemes is estimated at about 1.4 billion won (≈US$940,000).

Why the New Law Matters

The VAUPA was passed two years ago to bring the crypto market under a clear regulatory umbrella. It requires virtual asset service providers (VASPs) to:

• Keep user funds separate from their own assets, typically in bank accounts.
• Reduce the risk of fraud and protect investors.

Beyond safeguarding deposits, the Act curbs illicit behaviors such as insider trading, wash trades, and other forms of market manipulation. It grants the FSC greater power to oversee and audit VASPs, ensuring compliance with new standards.

Leveraging AI for Market Surveillance

To strengthen enforcement, regulators plan to use artificial intelligence for market surveillance. The goal is to:

• Spot high‑risk areas early.
• Respond quickly before problems grow.

A Broader Effort

These steps reflect South Korea’s broader effort to bring cryptocurrency trading into the same legal framework that governs traditional financial services. By tightening oversight and protecting users, the country hopes to build trust in digital assets while preventing abuse.