South Korea’s Financial Supervisory Service plans to conduct an investigation into high-risk areas of the virtual asset market, such as whale-driven manipulation and API-based spoofing, according to local media.
Summary
- South Korea’s FSS will investigate whale-driven manipulation, spoofing via APIs, and token price inflation tactics.
- AI tools will be deployed to detect abnormal trading patterns and voice phishing.
- The FSS will also introduce fines for IT-related incidents and tighten on-site inspections.
The FSS is ramping up enforcement efforts as part of its 2026 plan and will utilize advanced tools like artificial intelligence to identify suspicious trading patterns, alongside legislative frameworks like the Digital Asset Basic Act to curb market abuse and enhance oversight in the crypto industry, Yonhap said on Feb. 9.
According to the reports, the FSS will conduct an investigation into practices like whale price manipulation, alongside schemes like the “net cage” method, where withdrawals and deposits have been suspended on specific tokens, and acts like the “horse racing” tactic involving large-scale buying to quickly increase the price of a token at a specific point in time.
Among other areas, the FSS will also scrutinize the use of API orders for market manipulation and investigate cases where social media is used to spread false information and influence token prices.
The FSS plans to use artificial intelligence to detect price manipulation at the second- and minute-level, automatically flag suspicious trading intervals and groups, and conduct text analysis to uncover coordinated manipulation efforts. AI will also be used to prevent voice phishing scams by facilitating real-time information sharing between telecommunications and financial companies and laying the groundwork for a future compensation system for affected victims.
At the same time, it will introduce a dedicated preparatory team to support and ensure the smooth implementation of the second phase of the Digital Asset Basic Act. The team will establish a disclosure system for token issuance and trading support, and develop guidelines for the proper reviewing and licensing of crypto exchanges and stablecoin issuers.
A special judicial police consultative body will be established to strengthen on-site enforcement for financial crimes against consumers, in line with President Lee Jae-myung’s plan to prioritize crackdowns on abusive financial practices.
A separate team will focus on IT risks across the financial sector, and new fines for IT-related incidents will be introduced as a punitive measure. Companies that fail to properly manage IT assets or identify and address security vulnerabilities in their systems would be subject to on-site inspections and audits.
The latest notification comes just days after Bithumb, South Korea’s second-largest crypto exchange, became the center of controversy after an internal error led to the accidental distribution of 2,000 Bitcoin to users. As a result, the price of Bitcoin on the platform briefly fell more than 10% below prices on other major exchanges.
