South Korea’s Financial Services Commission (FSC) says it has investigated more than 40 cases of alleged unfair trading involving digital-asset markets over the past two years, ranging from market manipulation to fraudulent crypto trading.

In a post on X, FSC Chair Lee Eog-won reported that 30 of the cases were referred to investigative bodies or reported for further action. He also said the commission identified 25 suspects after the Virtual Asset User Protection Act took effect in July 2024.

Key takeaways

• FSC investigations covered more than 40 unfair trading cases across the past two years, including suspected manipulation and fraud.
• After the Virtual Asset User Protection Act began in July 2024, Lee said the FSC identified 25 suspects and referred or reported 30 cases.
• Lee estimated average unlawful gains at about 1.4 billion won (roughly $940,000) per case.
• The law requires crypto service providers to separate customer deposits and holdings from company assets, with client funds kept in banks.
• South Korea plans to keep expanding AI-assisted surveillance and concentrate on “high-risk areas.”

What the FSC says it has uncovered

Lee Eog-won’s update frames the investigations as a step toward bringing previously less-regulated digital-asset activity under stronger oversight. According to his account, the FSC investigated “more than 40 cases” of alleged unfair trading such as market manipulation and fraudulent trading behavior within the last two years.

Lee added that, within that set of matters, 30 cases were reported or referred to investigative agencies. He linked the period after July 2024—when the Virtual Asset User Protection Act began—to a more structured enforcement pipeline, saying 25 suspects were identified following the law’s implementation.

He also provided an estimate for enforcement economics: average unlawful gains were around 1.4 billion Korean won (about $940,000). While the figure doesn’t break down how gains were calculated in each case, it underlines the FSC’s message that the alleged violations were financially material, not merely technical rule breaches.

How the Virtual Asset User Protection Act changes enforcement

The Virtual Asset User Protection Act is designed to protect users who buy or store crypto assets through regulated virtual asset service providers (VASPs). In practical terms, the FSC highlighted that VASPs must segregate customer deposits and virtual assets from their own corporate holdings.

Under the framework Lee referenced, client deposits are held in banks rather than being commingled with the provider’s own funds. This structure is intended to reduce the risk that customer assets are impaired or diverted if a firm faces operational or financial stress.

The law also targets trading misconduct such as insider trading, wash trading, and market manipulation. Importantly for market participants, the FSC’s role extends beyond licensing and basic compliance: the commission can supervise and inspect VASPs more directly, giving it a clearer enforcement mandate tied to specific categories of prohibited conduct.

Surveillance and AI monitoring—what Lee says will come next

Beyond prosecution and referrals, the FSC chair indicated a continued push to upgrade the monitoring systems used to detect wrongdoing. Lee said the FSC will enhance market surveillance investigation and monitoring systems “based on AI,” and will respond proactively to “high-risk areas.”

That language suggests authorities plan to refine detection for patterns associated with manipulation and other unfair trading tactics, rather than relying solely on post-event investigations. For traders and compliance teams, the key implication is that automated or AI-assisted tools may increasingly shape which activities are flagged, investigated, and escalated for enforcement.

It is also notable that Lee’s update ties enforcement activity to a legal milestone: the second anniversary of the user protection legislation. The emphasis on surveillance capacity—rather than only outcomes—points to an enforcement strategy that seeks earlier identification of misconduct, which can affect how VASPs structure compliance controls and how quickly suspicious behavior is escalated.

Why these enforcement numbers matter to the market

The FSC’s figures—more than 40 investigated cases over two years, with 30 referred or reported and 25 suspects identified after the July 2024 start—serve as a signal to South Korea’s crypto ecosystem that regulatory scrutiny is not limited to paperwork or isolated cases.

For investors, the segregation requirements described by Lee are intended to improve the safety of customer funds. For VASPs, the shift is both operational and reputational: firms must demonstrate that they can comply with asset separation rules while also meeting expectations around market integrity and monitoring.

For traders, the reference to insider trading, wash trading, and market manipulation matters because it underscores that the regulator is actively focused on the mechanics of trading—not just the availability of crypto services. As AI monitoring expands, the compliance burden may increasingly include data-driven controls and more robust reporting processes designed to reduce the risk of violations that authorities can detect and pursue.

Related coverage: South Korea to bring digital assets under new state asset management system.

Going forward, investors and market operators should watch whether the FSC’s AI-assisted surveillance results in a higher rate of referrals and sanctions tied specifically to the law’s protected-user requirements and trading-integrity rules, and whether the average unlawful gains figure is followed by more detailed breakdowns that clarify how investigators assess proceeds and harm.

Allbridge Core, a cross-chain stablecoin bridge, said it has paused the protocol as a precaution after a “security incident” that reportedly saw $1.65 million drained on Sunday.

The incident affected Allbridge Core’s Solana deployment, with the attacker having already bridged the stolen funds from Solana to Ethereum before moving them into privacy pools. 

“Allbridge Core is experiencing a security incident,” it said in a post on X on Sunday. “We have paused the protocol as a precaution while we investigate. If you have liquidity in affected pools, please withdraw now.” 

The Allbridge Core exploit is at least the sixth attack targeting a cross-chain bridge since May. Bridges are attractive targets for attackers because they often hold large pools of funds that back bridged assets on the destination blockchain. 

Source: Lookonchain

Onchain Lens reported the attacker made a $1.12 million USDC (USDC) flash loan from Kamino, before rapid USDC/USDT swaps that distorted the Allbridge Core stablecoin pool’s exchange rate. 

Related: Taiko reopens bridge after $1.7M exploit, says users made whole 

The attacker then withdrew liquidity at manipulated rates, repaying the $1.12 million USDC loan and keeping the difference. 

“The resulting pool imbalance created a temporary positive arbitrage window. If you took advantage of it, please consider returning funds… this will go directly toward compensating affected LPs,” it added.

This wasn’t the first time Allbridge Core was hit by a flash loan attack.

In April 2023. Allbridge was exploited for $573,000 through a flash loan attack on Allbridge’s pool on the BNB Chain. The attacker acted as both liquidity provider and swapper, and exploited a flaw in a smart contract that allowed them to manipulate swap prices, which led to $289,900 drained in Binance USD (BUSD) and $290,900 in USDt (USDT).

Warning posted to the Allbridge Core website. Source: Allbridge Core

Cross-chain bridges targeted since May 

In June, Taiko, an Ethereum layer-2 blockchain, urged its users to withdraw assets from the network’s bridges after attackers exploited one of its bridge protocols and stole $1.7 million. 

Taiko reopened its bridge 11 days later after completing a four-step recovery plan. 

Weeks before the Taiko incident, Secret Network was exploited through an “infinite mint” bug on a vulnerable smart contract, which created unbacked versions of Axelar-wrapped assets, resulting in a $4.67 million exploit.  

Other recent bridge exploits included the Gravity Bridge, Verus Bridge and the Butter Network. 

Magazine: The British Virgin Islands are a top crypto hub no one ever talks about: Here’s why

South Korea’s Financial Services Commission (FSC) says it has investigated more than 40 cases of alleged unfair conduct in the crypto market over the past two years, ranging from market manipulation to fraudulent trading activity. The regulator also claims it has identified 25 suspects connected to those matters after the Virtual Asset User Protection Act took effect in July 2024.

FSC Chair Lee Eog-won shared the figures in a post on X, noting that 30 of the cases have been reported to or referred to investigative authorities. He said the average unlawful gains in the matters reviewed were roughly 1.4 billion Korean won (about $940,000).

Key takeaways

• The FSC reports probing 40+ unfair trading cases over two years, including manipulation and fraud.
• After the Virtual Asset User Protection Act began in July 2024, Lee said authorities identified 25 suspects tied to 30 reported or referred cases.
• Lee estimated average unlawful gains of about 1.4 billion won per case.
• The law strengthens the FSC’s ability to supervise and inspect crypto service providers (VASPs), with additional focus on high-risk trading behavior.
• The regulator says it plans to expand market surveillance using AI-assisted monitoring and targeted responses.

Why the numbers matter for South Korean crypto markets

The FSC’s update is significant because it frames crypto enforcement not as isolated incidents, but as an ongoing investigative pipeline. By connecting the latest suspect and case counts to the start of the Virtual Asset User Protection Act, the regulator is effectively signaling that the post-legislation framework is now producing measurable enforcement outcomes.

For traders and users, the practical implication is that conduct previously handled under looser or less specific oversight is increasingly being treated as compliance and supervision issues—especially for activity that regulators typically view as harmful to market integrity, such as wash trading and insider-related behavior.

What the Virtual Asset User Protection Act requires from VASPs

At the core of the regulator’s message is how the July 2024 law changes the relationship between crypto platforms and investors. According to Cointelegraph reporting, the Virtual Asset User Protection Act is designed to protect users who buy and store crypto assets through virtual asset service providers (VASPs).

Under the framework described by the FSC, VASPs are required to separate client deposits and virtual assets from the company’s own holdings. Client deposits are held in banks, creating a structural distinction intended to reduce the risk that user funds could be mixed with corporate assets.

The statute also specifically targets market integrity issues, aiming to deter and address illicit practices such as insider trading, wash trading, and market manipulation. This, in turn, broadens the FSC’s oversight remit and gives the commission more authority to supervise and inspect VASPs.

Focus on market surveillance and enforcement capacity

In the same X post, Lee said the FSC will keep enhancing its market surveillance and investigation systems, explicitly citing the use of AI to support monitoring. He also indicated that authorities will “proactively respond to high-risk areas,” a phrase that suggests the regulator is increasingly focusing resources where it expects the most misconduct risk rather than reacting only after damage has occurred.

This matters because enforcement outcomes often depend not just on legal authority but on the ability to detect patterns in trading behavior at scale. The FSC’s emphasis on AI-based monitoring aligns with the kinds of tactics it named—wash trading and manipulation are frequently identifiable through transaction and order-flow patterns that can be monitored continuously.

Earlier coverage by Cointelegraph has also noted how South Korea is moving to bring digital assets more firmly within state oversight structures, including steps that extend beyond user-protection provisions. The latest enforcement update fits that broader direction by showing how supervision and investigations are being operationalized.

What investors should watch next

Going forward, the most important signal for market participants is whether the FSC’s investigation pipeline translates into sustained compliance pressure on VASPs—especially around surveillance-heavy practices like wash trading and manipulation. Readers should watch for additional enforcement actions and any expansion of AI-assisted monitoring capabilities, since that is likely to determine how quickly suspicious activity is detected and how consistently it leads to referrals and sanctions.

Momentum behind the US CLARITY Act appears to be fading as political and ethics concerns collide with a potential Senate push. Polymarket places the odds of the bill passing this year at about 40%, citing objections from Democratic lawmakers and raising the possibility that the ethics controversy could derail broader bipartisan work.

Beyond Washington, crypto’s second quarter showed a split: mainstream trading activity continued to contract, while prediction markets hit record volumes. At the same time, France moved to block Polymarket, underscoring how regulation is shaping where and how prediction markets can operate.

Key takeaways

• Polymarket estimates roughly a 40% chance that the CLARITY Act clears the Senate this year.
• Senate Majority Leader John Thune said a vote will be held before Aug. 10, but ethics-related disputes are complicating Democratic support.
• CoinGecko’s Crypto Industry Report shows spot trading on the top 10 centralized exchanges fell from $2.7T in Q1 to $1.95T in Q2.
• Prediction markets bucked the trend, reaching $113.8B in notional volume in Q2, while France’s gambling regulator ordered Polymarket access blocked.
• Tokenized stocks recorded a new high at $2.3B in global market cap, led by Ethereum (34%) and BNB Chain (30%).

CLARITY Act vote faces an ethics-driven test

Several Democrats have signaled resistance to the CLARITY Act, according to Cointelegraph’s earlier reporting on Senate opposition from lawmakers including Chris Murphy, Jeff Merkley and Chris Van Hollen (see linked coverage). The concern centers on how the bill intersects with the politics of crypto advocacy and potential conflicts of interest.

Cointelegraph reports that Senate Majority Leader John Thune indicated a crucial vote could happen as early as this week and would definitely take place before Aug. 10. But the political calendar alone may not be enough: Democrat Senator Elizabeth Warren is attempting to “spoil the vote” by spotlighting alleged links between President Donald Trump and crypto profits, Cointelegraph says.

Warren’s push builds on claims that Trump earned more than $1 billion from crypto last year, based on a 2025 disclosure. Cointelegraph also notes that this is why Senate Democrats may be unwilling to support the bill unless it includes language barring elected officials from promoting or issuing cryptocurrency.

“Ethics is the big elephant in the room.”

The quote is attributed to Summer Mersinger, CEO of the Blockchain Association and a former commissioner at the US Commodity Futures Trading Commission, in Cointelegraph’s linked coverage (see linked coverage).

“For my members and what we are advocating for on the Hill… look, whatever you decide on ethics, that’s really not our concern. That is politics. That’s Congress. That’s elected officials. But please don’t let it kill all the hard work that we put in the rest of the bill.”

For investors and builders, the practical risk is straightforward: even if the CLARITY Act advances on substantive market-structure provisions, passage could hinge on whether lawmakers accept ethics guardrails that satisfy Democratic conditions. Readers should watch whether negotiators offer a specific ban on officials’ crypto activity—or whether the bill’s schedule slips despite Thune’s stated timeline.

Q2 revealed a divergence: spot weakness, prediction market strength

Crypto markets were weak in Q2 overall, but prediction markets stood out as an exception. CoinGecko’s Crypto Industry Report, cited by Cointelegraph, shows spot trading volume across the top 10 centralized exchanges dropped from $2.7 trillion in Q1 to $1.95 trillion in Q2.

Derivatives also softened. CoinGecko data cited in the report indicates CEX perps volume declined 10% to $12.7 trillion, while the stablecoin market fell 1.6% to $305.1 billion.

Against that backdrop, prediction markets recorded their strongest quarter on record, reaching $113.8 billion in notional volume. Cointelegraph links that performance to Polymarket’s specific categories as well: the platform’s World Cup winner market has attracted more than $3.3 billion in trading volume, and contracts tied to the 2028 US presidential election rank among the platform’s largest markets, according to Polymarketscan data (polymarketscan).

France blocks Polymarket as regulation tightens

While prediction markets appear to be drawing record engagement, regulatory actions are limiting access. Cointelegraph reports that France’s National Gambling Authority ordered internet service providers to block access to Polymarket after concluding that prediction markets may fall under illegal gambling.

The report adds that Polymarket is blocked in 33 countries, while users can still often access via tools such as VPNs—an important reminder that enforcement patterns can vary and that compliance risk can shift as regulators act.

For market participants, the implication is that prediction-market growth may be constrained not only by liquidity and user demand, but by whether regulators treat the platform as a sportsbook, a financial product, or something in between. Upcoming legal clarity in France and elsewhere will likely influence where future liquidity concentrates.

Tokenized stocks reach $2.3B as traditional finance experiments continue

Tokenized equities also chalked up a milestone. Cointelegraph cites Token Terminal data saying global market capitalization of tokenized stocks rose to a record $2.3 billion on Wednesday.

Ethereum led with a 34% share, followed by BNB Chain at 30% and Solana at 23%, according to the same Token Terminal dataset shared in a post on X by Token Terminal (see post).

Growth was driven by issuer and exchange-specific activity. Cointelegraph points to Kraken exchange’s xStocks representing $507 million and Binance’s bStocks at $334 million, while Ondo Finance remained the largest tokenized stock issuer with $955 million in onchain equities, based on Token Terminal data (Token Terminal explorer).

The custody and infrastructure layer remains a key battleground for legitimacy and scaling. Cointelegraph notes that the Depository Trust & Clearing Corporation (DTCC), described as custodian of $114 trillion in assets, launched a trial of tokenized securities in partnership with more than 40 financial firms.

Separately, Cointelegraph mentions Robinhood Chain’s ambition to lead in tokenized stocks, while also noting that its volume to date has been driven largely by memecoins—an observation that highlights how tokenized equity momentum may still depend on user acquisition beyond the “equities” narrative itself.

Regulatory alignment on stablecoins, compliance clock still ticking

US and UK authorities are seeking alignment on parts of tokenized finance. Cointelegraph reports that the US Department of the Treasury and HM Treasury in the UK issued four joint recommendations on digital assets (see linked coverage).

The task force recommends that regulators consider a private-sector-led group to test cross-border use cases for tokenized assets, while also asking US financial agencies and the Bank of England to identify shared regulatory approaches for tokenized assets.

On stablecoins, the statement says they “should be fully backed, on at least a one-to-one basis, by high-quality, liquid assets,” aligning with the structure in US law.

However, Cointelegraph also reports that, shortly afterward, it emerged that US regulatory agencies missed a Saturday rulemaking deadline for the GENIUS stablecoin act. Cointelegraph clarifies that missing a statutory deadline does not void the GENIUS Act, but could compress the time available for issuers to comply ahead of rules taking effect in January.

What to watch next

The next few weeks may determine whether the CLARITY Act can move past ethics-driven objections in the Senate, while the global pattern for prediction markets and tokenized assets will depend on how regulators translate policy into enforcement. Keep an eye on the CLARITY vote timetable, France’s follow-through on Polymarket restrictions, and how stablecoin compliance timelines evolve after the GENIUS rulemaking slip.

South Korea’s financial authorities investigated more than 40 cases of unfair trading, including market manipulation and fraudulent crypto trading, in the last two years. 

According to an X post by Financial Services Commission Chair Lee Eog-won, 30 of them reported or referred to investigative agencies, identifying 25 suspects since the Virtual Asset User Protection Act took effect in July 2024.

Lee said the average unlawful gains were around 1.4 billion Korean won ($940,000).

“Today marks the second anniversary of the enactment of the ‘Virtual Asset User Protection Act…’ It was a meaningful time that brought the virtual asset market, which was outside the institutional framework at the time, into the fold of the law and created an opportunity to establish a user protection system for virtual assets,” said Lee.

The Virtual Asset User Protection Act is designed to protect users who buy and store crypto assets with virtual asset service providers. 

VASPs are legally required to separate user deposits and virtual assets from their own corporate holdings, holding client deposits in banks. 

The legislation also targets illicit activities such as insider trading, wash trading and market manipulation, enhancing the Financial Services Commission (FSC) authority to supervise and inspect VASPs. 

“We will continue to enhance market surveillance investigation and monitoring systems based on AI, and proactively respond to high-risk areas,” Lee added.

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