On July 1, South Korea’s Financial Services Commission (FSC) handed over two separate cases of alleged crypto market price manipulation to the public prosecutor’s office. The first case centers on exploiting price differences between domestic and international exchanges, while the second focuses on the suspected creation of artificial trading activity in illiquid local tokens through high-frequency orders.
Two distinct manipulation allegations
In the first file, authorities state that, over two months, an investor who spent tens of billions of won acquired nearly half the global circulating supply of a token traded on both South Korean and overseas platforms. The FSC detailed how, after this massive accumulation, prices were first driven upward on foreign exchanges. Automatic trading systems and arbitrage opportunities then caused these price movements to quickly ripple through to South Korean markets.
Glossary: Arbitrage is the practice of buying and selling the same asset on different markets to profit from price differences. In crypto, automated systems can close these gaps rapidly, so sharp movements on one platform can quickly spread to others.
According to the Commission’s assessment, the suspect incurred losses on trades abroad, but realized higher profits when selling locally in South Korea. The ultimate burden, officials noted, fell on retail investors who chased rising prices but bought at the top.
The Commission warned that sudden spikes in price and volume—without a clear reason—especially when driven by a single major investor or a handful of accounts, pose significant risks for the market.
Bots suspected in “kimchi coin” trading
The second investigation concerns tokens colloquially known as “kimchi coins,” which are mostly listed on local exchanges. These assets’ low liquidity means even modest capital inflows can cause sharp price swings.
The probe found that the suspect accumulated a particular token in advance. Then, using API access, they placed a large number of buy and sell orders within a second to simulate active trading. Simultaneously, through the exchange’s website, they submitted buy orders more than ten times higher than the lowest listed price.
As outside investors mistook these sudden surges as genuine demand and entered the market, the suspect allegedly sold off their holdings piece by piece for a profit. The Financial Supervisory Service, South Korea’s main financial oversight authority, uncovered this scheme during a targeted review.
Regulatory authority issues fresh warnings
The Commission urged retail investors not to blindly follow unexplained surges in price and trading volume. They highlighted that assets concentrated in a single large wallet or just a few accounts could suffer sharp sell-offs, leading to heavy losses for latecomers.
Officials plan to strengthen early warning systems that flag when trading in a particular token is concentrated in a small number of accounts. Disclosure requirements for bulk accumulation and major sales by large holders are also set to be expanded.
Market oversight intensifies
Throughout 2026, South Korean regulators have intensified monitoring of the crypto sector. In April, following a $40 billion payment mishap at Bithumb in February, the FSC ordered the country’s five largest exchanges to reconcile their internal ledgers with real wallet balances every five minutes.
Also in April, new standard withdrawal delay rules were implemented after the discovery that 59% of fraud-linked crypto transactions identified between June and September 2025 took advantage of price anomalies between exchanges. The Commission introduced a framework in January allowing listed companies and licensed institutional investors to purchase crypto assets for the first time since 2017, capping holdings at 5% of equity capital.
