Five-month total already exceeds all of last year; calls grow for separate oversight of single-exchange listings

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Reports of unfair trading in the digital asset market have risen sharply even as sluggish bitcoin prices have kept the sector in a slump.

Data submitted to Democratic Party of Korea lawmaker Kim Hyeon-jeong by the Financial Supervisory Service show that the FSS's digital asset unfair trading reporting center received 54 complaints in the first five months of this year, Yonhap reported. That already exceeds the full-year total for last year (30 cases) and is comparable to the 55 cases recorded throughout 2024.

Market-price manipulation accounted for the vast majority of reports, with 50 cases. Reports involving the use of undisclosed information and fraudulent trading each numbered two.

The FSS established the digital asset unfair trading reporting center in January 2024. Because the center imposes no restrictions on what can be reported, some filings are believed to stem from mere suspicion covering multiple assets. Whether the rise in reports will translate into more actual sanctions or penalties remains to be seen, analysts say.

The FSS investigates not only cases filed through the reporting center but also abnormal trading flagged by exchanges and matters it identifies on its own. Investigation findings go through Financial Services Commission review before leading to follow-up measures such as criminal referrals or notifications to investigative agencies.

From the July 2024 enactment of the Virtual Asset User Protection Act through May this year, financial authorities referred 23 unfair trading cases — including self-identified ones — to prosecutors and notified investigative agencies of five others.

Some complaints have led directly to criminal investigations. A group that issued meme coins in January and February last year, artificially inflated prices with false positive news and then sold their holdings for illicit gains of about 400 million won ($259,000) came under investigation after a complaint was filed with the FSS.

Following a Financial Services Commission referral, prosecutors launched an investigation, and last month three people — including influencers involved in the scheme — were indicted on charges of violating the Virtual Asset User Protection Act. The case is considered the first in which the act's "fraudulent trading" provision was applied.

Industry observers say that alongside encouraging more reports, structural safeguards are needed to reduce the conditions that make unfair trading easy.

Kim Young-seok, chief executive of Bonanza Factory, a digital asset compliance firm, said that for virtual assets listed on only a single exchange, it is often difficult to determine a fair value or fair market price. "For single-exchange listings and similar assets, it may be worth considering a separate oversight mechanism based on criteria such as daily participant counts or investment limits," he said.


kyoung@heraldcorp.com