South Korea Probes Crypto Manipulation Tied to API Trading Abuse

South Korea has stepped up action against crypto market manipulation after uncovering two coordinated schemes. The Financial Services Commission (FSC) said it has referred the suspects to investigators. Officials found that the traders pushed prices up using aggressive orders and automated tools, including borrowed API access, to mislead investors and distort the market.

As per a local report, authorities said the schemes mixed classic “pump and dump” tactics with automated trading. In one case, a trader built a large position, then drove the price higher through repeated buy orders. As interest grew, the trader placed fake orders to keep prices steady while quietly selling holdings for profit. 

The FSC stated, “Through the market manipulation activities of these suspects, the average daily trading volume and price volatility of the virtual asset in question expanded significantly compared to before, and it was found that high market dominance was exercised, as evidenced by the similar trends formed between the market price and the suspects’ holdings.”

API abuse and wash trading tactics

Authorities also uncovered a second scheme tied to API key misuse. Investigators said the suspect obtained API keys from multiple users in exchange for fees, then used them to run wash trades across linked accounts. The activity created artificial volume and gave the impression of active market demand.

This led to retail traders believing that there was real interest in the asset when, in fact, they were being misled by a fake trading volume, thus leading them to enter the market. In addition, the trader pushed the price upwards using a series of high bids and then selling into the created demand. 

The commission stated, “Users (the account holders) must exercise special caution, as they may face civil and criminal liability, including punishment as accomplices in illegal activities, if their API keys lent to others are used for unfair trading or money laundering.”

AI surveillance and global context

Authorities are also strengthening surveillance using artificial intelligence. The Financial Supervisory Service has upgraded its VISTA platform with automated detection tools. Previously, investigators relied on manual review of transaction data, which slowed down enforcement. Now, the system flags suspicious activity faster and maps trading behavior in real time.

Nevertheless, recent developments have highlighted some gaps in the supervision process. Missing Bitcoins have been detected within confiscated portfolios, suggesting potential vulnerabilities in custodian measures and internal security procedures.

In addition, authorities elsewhere in the world are dealing with comparable challenges. Market manipulation services have been a target of SEC investigations in the United States. South Korea’s stance is consistent with the new trend that is emerging globally regarding increased surveillance of automated trading and crypto fraud.

Also Read: South Korea Sets 2028 Crypto Tax Filing Plan for Investors