Achievements on the 2nd Anniversary of the Virtual Asset User Protection Act: South Korean Financial Authorities Investigate 40 Market Manipulation Cases and Introduce AI Monitoring System

Marking the second anniversary of the Virtual Asset User Protection Act on July 19, 2026, FSC Chairman Lee Eok-won stated that authorities have investigated a total of 40 cases of virtual asset market manipulation over the past two years. This serves as an indicator of South Korea's commitment to strengthening market transparency and accountability as a global virtual asset trading hub.

This announcement reflects the investigation results accumulated since the law's implementation in July 2024, signifying that the virtual asset market, which was previously in a regulatory vacuum, has now been placed under a public oversight system. Authorities are maintaining a strict law enforcement stance, particularly considering the characteristics of the domestic market, which has a high proportion of individual investors.

According to the FSC's commemorative report, the past two years have been a process of ending the "lawless zone" era of the virtual asset market and establishing a structured investigation environment. Authorities have been capturing clues of illegal activities by monitoring abnormal transactions in real-time through cooperation with virtual asset exchanges.

The Virtual Asset User Protection Act has become the legal foundation for defining market manipulation not just as an immoral act, but as a crime subject to strict criminal penalties and administrative sanctions.

This law imposed obligations on virtual asset service providers to store deposits separately, obtain insurance, and monitor abnormal transactions. Through this, financial authorities have gained powerful authority to directly investigate and punish unfair trading practices such as market manipulation or the use of undisclosed information.

Referral of Investigation Cases to the Prosecution and Key Tactics

Financial authorities are accelerating judicial proceedings by referring or notifying the prosecution of more than 30 out of 40 completed investigation cases. The primary tactics under investigation have been classified as high-risk activities that seriously undermine market fairness.

• Large holders known as 'whales' accumulating volume and then artificially inflating prices
• Exploiting API ordering systems to repeatedly submit fictitious orders
• Luring investors by spreading false information through social media and online communities

In particular, sophisticated manipulation methods such as 'Containment,' which traps the liquidity of specific assets, or 'Ramp' tactics, which rapidly drive up prices, have become targets of intensive investigation. Authorities believe these actions erode market trust and cause large-scale investor losses.

Beyond merely conducting investigations, authorities are actively utilizing new legal tools for the substantial freezing and recovery of criminal proceeds. This reflects a policy direction that prioritizes investor protection.

$1 Billion Asset Freeze Case

The pre-emptive account freezing authority proposed in January 2026 has already proven its effectiveness in large-scale cases. The 'Joint Response Team for Stock Price Manipulation' took pre-emptive action to freeze 75 accounts related to approximately $1 billion in market manipulation allegations without a warrant.

Through this measure, the outflow of approximately 40 billion KRW (about $27 million) in unrealized gains that the suspects intended to pocket was blocked. This is cited as a representative case where authorities exercised their power to freeze assets in urgent situations even before a standard warrant is issued.

AI-Based Surveillance System and Future Regulatory Directions

The Financial Supervisory Service (FSS) will fully introduce an AI-based real-time surveillance system as part of its 2026 virtual asset supervision plan. This system will maximize investigation efficiency by detecting false information on social media through text analysis technology and automatically capturing patterns of sharp price fluctuations.

Meanwhile, discussions on 'Phase 2 Legislation'—which includes mandatory insurance for stablecoins and regulations on the issuance and distribution of virtual assets—are in full swing in the National Assembly. This integrated bill, led by the Democratic Party of Korea, is expected to materialize during the second half of 2026, and it is anticipated to further enhance the regulatory completeness of the Korean virtual asset market.