Court issues first conviction for crypto manipulation

A group accused of artificially inflating cryptocurrency prices to gain roughly 7.1 billion won in illicit profits was found guilty in a first-instance trial. The ruling marks the first conviction under South Korea’s Virtual Asset User Protection Act, which took effect in 2024 and introduced penalties for unfair cryptocurrency trading.

On Feb. 4, the Seoul Southern District Court’s Criminal Division 14, presided over by Judge Lee Jeong-hee, sentenced the chief executive of a cryptocurrency management firm, identified only as Lee, 35, to three years in prison, a 500 million won fine, and forfeiture of 846.56 million won. Lee had been indicted in custody on charges of violating the virtual asset law. A former employee, identified as Kang, 30, who was also indicted in custody on the same charges, received a two-year prison sentence, suspended for three years.

The court said the defendants’ actions constituted a serious crime that disrupted fair price formation in the virtual asset market and undermined investor trust, concluding that their conduct amounted to price manipulation. However, the judges found that the prosecution had not fully substantiated its claim that the illicit gains totaled 7.1 billion won. Under the current law, when profits obtained through violations are difficult to calculate, fines are capped at 500 million won. The court therefore imposed the maximum fine and ordered forfeiture of about 846 million won.

During the final hearing in November, prosecutors had sought a 10-year prison term and a fine of roughly 23 billion won for Lee, and a six-year sentence for Kang.

Lee and Kang were charged with manipulating prices between July and October 2024 by using automated trading programs to inflate transaction volumes and repeatedly place fictitious buy orders, allegedly generating about 7.1 billion won in unlawful profits. According to the prosecution, the cryptocurrency’s daily trading volume was around 160,000 units before the scheme began. After the manipulation, the figure surged to 2.45 million units, roughly 15 times higher, with 89 percent of trades attributed to Lee.

The Virtual Asset User Protection Act, which took effect in July 2024, aims to curb unfair trading practices in the cryptocurrency market. The law was enacted in the wake of the 2022 collapse of FTX and the sharp declines of Terra and Luna, amid growing calls to strengthen user protections and close regulatory gaps. Violations carry a minimum prison sentence of one year or fines linked to the amount of illicit gains. The legislation provides a legal framework to penalize insider trading, price manipulation, and other fraudulent market practices.

This case is the first in which prosecutors received a referral through an emergency fast-track procedure from the Financial Supervisory Service since the law’s enactment. Previously, prosecutors relied on provisions of the Criminal Act, including fraud and obstruction of business, to pursue cryptocurrency-related price manipulation cases.


이수연 lotus@donga.com