South Korea launches investigation into alleged ZKsync price manipulation

ZKsync token surged by 970% on Upbit exchange, sparking concerns over possible price manipulation. The volatility has triggered an investigation by South Korean financial regulators, who believe the spike was a result of suspicious trading activity.

South Korean financial regulators have opened investigations into the Upbit exchange after the ZKsync token surged by 970% in three hours before dropping back to its initial price. Regulators believe the spike was the result of price manipulation and said they are investigating the matter.

ZKsync token spikes by 970% on Upbit, prompting regulatory action

ZKsync was trading at $0.023 on Sunday morning, South Korean time, as the Upbit exchange prepared for scheduled system maintenance. At 11:30 AM, just before maintenance began, the price rose significantly to $0.24 over the next three hours, only to drop back to around $0.023 by 6:30 PM the same day, after the maintenance period ended.

A spokesperson for the Financial Security Service’s Virtual Asset Investigation Bureau said that the financial watchdog had noticed the peculiar price behavior ZKsync experienced that day and was looking into the matter, after which things “may quickly transition to a formal investigation after determining the severity of the case.”

Experts told a local South Korean newspaper that traders on the exchange set up a “buy wall” just before the maintenance period began, as part of a coordinated effort to artificially spike demand for the coin and push its price higher. According to data from the Upbit exchange, trading volumes in ZKsync surged by over 4,200% at the time of the incident. In comparison, the token’s trading volume on Coinbase rose by a more modest 150% on the same day, while prices increased by just under 40%. The volume on Binance rose by 180%, while the crypto asset’s price moved by just 38-42%.

According to legal experts, the action falls under the Virtual Asset User Protection Act, which came into effect in July 2024. Jin Hyeon-su, managing partner at Decent Law Firm, said that “a large number of buy orders being concentrated in a short period of time, followed by a release of the volume afterwards” likely results in “price manipulation, collusive trading, and unfair trading.” 

The action is illegal under South Korean regulations, and perpetrators face over a year in prison and fines totaling up to five times the realized profits if found guilty. The court can also impose additional fines on the manipulators if it finds that other traders have suffered financial losses as a result of the price manipulation.

Bithumb CEO sentenced to three years in prison for price manipulation on the exchange

A previous Cryptopolitan report dated February 4 noted that the Criminal Division of the Seoul Southern District Court, presided by Judge Lee-hee, sentenced Lee Jong-hwan, the CEO of Bithumb, a South Korean cryptocurrency company, to up to 3 years in prison for manipulating virtual asset prices on the exchange. 

On top of the sentencing, Lee Jong-hwan was fined 500 million won (more than $340,000), and an additional 846.56 million won (more than $550,000) for breaking the Virtual Asset User Protection. The court also found Kang Min-cheol, a former employee of the Bithumb exchange, guilty and sentenced him to two years in prison with a three-year suspension.

The news comes after South Korea’s authorities rolled out artificial intelligence technology to detect market scams and suspicious transactions in real time. The Financial Supervisory Service (FSS) highlighted the growing sophistication used by criminals, including the use of Application Programming Interfaces (APIs) to conduct high-frequency trading (HFT) that can manipulate prices in milliseconds.

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