'Red light flashing' lured retail investors... manipulation ring exposed

The Financial Services Commission has reported suspects who allegedly used large sums of money to artificially raise coin prices or used automated trading programs (API) to inflate trading volume to investigative agencies.

On the 5th, the Financial Services Commission held its 19th regular meeting and resolved to report suspects in two cases of virtual asset market manipulation to investigative agencies.

According to the investigation, in the first case the suspect accumulated a certain virtual asset in advance on the order of several billion won, placed sell orders at target prices higher than the purchase prices, and repeatedly placed high-priced buy orders by mobilizing tens of billions of won so that the market price would reach the target price.

As retail investors showed buying pressure in response to the artificially formed upward trend, the price rose further and the pre-submitted sell orders were executed, realizing profits. The Financial Services Commission believes the suspect repeated this technique several times and obtained illicit gains on the order of tens of billions of won.

In the second case, multiple suspects acted in an organized manner. Using APIs, they repeated market buy and sell orders for a specific coin several times per second for tens of minutes to make trading appear active. They exploited the exchange's visual effect—using the fact that the 'current price' display flashes red whenever the price rises—to give retail investors the false impression that trading was active.

They directly placed additional high-priced buy orders while the APIs were operating to push up the price, and when the price rose they quickly sold their holdings, pocketing profits in the hundreds of millions of won.

The Financial Services Commission urged investors to exercise special caution, saying, "If the price of a low-liquidity virtual asset surges or trading volume spikes without any particular reason, there is a risk of a sudden sharp decline."

Acts that artificially move market prices, such as high-priced buy orders or API orders, can be subject to punishment and fines under the 'Act on the Protection of Virtual Asset Users'. Penalties can include fines of three to five times the profits obtained through market manipulation or imprisonment of one year or more.

The Financial Services Commission said, "We will strictly investigate and take action against unfair trading practices to protect users and establish a sound market order."

Reporter Park Ju-yeon grumpy_cat@hankyung.com