South Korea Refers Crypto ‘Whale’ Investors to Prosecutors in Price Manipulation Cases

South Korean financial authorities have referred so-called whale investors to prosecutors after finding alleged price manipulation in the virtual-asset market across domestic and overseas exchanges.

The Financial Services Commission said on July 1 that, at its 12th regular meeting, it approved complaints to prosecutors and other investigative agencies against suspects tied to two market-rigging cases.

According to the FSC, suspect A is accused of using tens of billions of won over about two months to manipulate the price of a virtual asset listed on multiple domestic and overseas exchanges. Investigators found that A bought up about half of the asset’s global circulating supply, secured a dominant market position and then artificially created the appearance of stronger buying demand to influence prices.

Authorities said A exploited the price linkage between multiple exchanges. After first driving up the price on overseas exchanges, A allegedly induced gains in the same token on domestic exchanges and drew in purchases from Korean investors.

A incurred losses on overseas exchanges but made larger profits on domestic platforms. The damage was concentrated among Korean investors, the FSC said.

Another suspect, B, is accused of carrying out ultra-short-term price manipulation by combining market orders through an application programming interface, or API, with high-priced limit buy orders. The Financial Supervisory Service uncovered the case in a targeted probe.

Investigators found that B bought so-called kimchi coins in advance and then repeatedly placed market buy and sell orders through an API channel. At the same time, B repeatedly submitted high-priced buy orders above the 10th-best ask through a web channel to push prices higher.

After buying interest flowed into the market, B allegedly sold holdings in split orders to realize gains.

The FSC urged investors to avoid momentum buying in virtual assets whose prices and trading volumes surge without a rational basis. It added that losses from pump-and-dump schemes can be even greater when whale investors heavily accumulate tokens, drive up prices and then sell them all at once to lock in profits.

Financial authorities said they plan to strengthen the provision of information on whale investors’ accumulation and disposal of virtual assets by improving market alert systems, including monitoring concentrated trading in a small number of accounts.

They also said they will upgrade surveillance systems for unfair trading in the virtual-asset market to detect and strictly punish price manipulation and other misconduct by whale investors.