Financial Committee transfers two cases suspected of manipulating virtual asset markets to prosecutors... Announces increased regulation

The Financial Services Commission decided on the 29th to refer two cases involving the suspected use of application programming interface (API) keys for automatic virtual asset trading and incidents of market manipulation to prosecutors. This move is further strengthening the monitoring of unfair trading practices in the virtual asset market.

From the cases uncovered this time, the methods of market manipulation are evolving into malicious exploitation of technical convenience features to disrupt the market. According to investigations, suspect A paid a fee to borrow API keys for multiple virtual asset exchange accounts and sequentially placed high-priced buy orders across these accounts to inflate the market price. Subsequently, by repeatedly conducting wash trades (collusive trading) to create an active trading atmosphere, they induced ordinary investors to follow suit and buy in, then sold most of their holdings to profit from the price difference, leading to charges.

Authorities believe suspect B disrupted prices in another way. After targeting a specific virtual asset for manipulation, the suspect first actively bought assets worth tens of millions of Korean won to secure holdings, then issued concentrated manipulative orders in a short period to induce a price increase. To prevent the price from falling back, they even placed fake buy orders as a defense, then sold, gaining improper profits of tens of millions of Korean won. This behavior, which involves artificially raising prices and trading volume through human orders rather than actual demand, sends false signals to ordinary investors and is regarded as a typical market disruption.

At the eighth regular meeting held on the same day, the Financial Services Commission decided to report these two cases to prosecutors and warned that borrowing API keys itself is a very dangerous behavior. The authorities explained that if an individual lends their API key to others and it is used for unfair trading or money laundering, the nominal holder could also be penalized as an accomplice or held liable civilly or criminally. They also advised investors that when the prices and trading volumes of certain assets rise sharply without clear reasons, they should exercise caution before following the trend.

Work to improve the system will also proceed simultaneously. The authorities plan to require users to register their internet addresses (IP) when issuing API keys in the future and strengthen order information collection and management systems to ensure API services can only be accessed from registered IP addresses. Additionally, they will establish monitoring systems to screen high-risk accounts to identify those that may improperly lend or borrow API keys. As the virtual asset market expands, unfair trading using automated trading tools may become more sophisticated, and this trend is likely to develop toward simultaneously strengthening technical regulation and investor warnings.