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South Korea’s top financial watchdog is stepping up oversight of crypto markets days after local exchange Bithumb mistakenly distributed billions of dollars worth of bitcoin to users.
The Financial Supervisory Service said Sunday it will start investigations into “high-risk” practices that undermine market order, including large-scale price manipulation by so-called whales, trading schemes tied to suspended deposits and withdrawals and coordinated pump tactics fueled by social media misinformation.
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The watchdog also said it plans to build tools that automatically extract suspicious trading patterns by the second and minute, alongside text-analysis systems using artificial intelligence to flag potential market abuse.
The announcement follows a widely reported exchange error last week in which some users of Bithumb, among the country’s biggest exchanges, were mistakenly credited with at least 2,000 bitcoin each instead of small promotional rewards, a blunder estimated at roughly $44 billion at the time.
Financial authorities are scheduled to report the full details of the incident to the National Assembly’s Political Affairs Committee, according to local news services.
Bitcoin prices on the exchange dropped 30% below the global average at the time as some recipients tried to sell the assets. The exchange had restricted trading and withdrawals for the 695 affected customers within 35 minutes of the erroneous distribution on Friday.
Bithumb has since waived transaction fees for a week and started a compensation program, offering full restitution plus an additional 10% to users who panic-sold their assets during the crash.
Regulators said the incident exposed the “vulnerabilities and risks” of virtual assets and signaled they could conduct on-site inspections of exchanges if irregularities are found in internal control systems.
Authorities are specifically targeting assets that exist on the ledger, but are not backed by actual reserves, noting that the accidental distribution exceeded Bithumb’s total holdings by a factor of 10.
Beyond market manipulation, the FSS said it will introduce punitive fines for IT incidents across the financial sector and raise the security accountability of chief executives and chief information security officers, a shift that could have direct implications for crypto trading platforms.
The agency also confirmed it has set up a preparatory team for the Basic Digital Asset Act, which would expand Korea’s regulatory framework beyond the first phase of crypto rules.
The crackdown plan reflects a broader push by President Lee Jae-myung to stamp out what he has called “cruel financial practices,” with the FSS also outlining measures to strengthen enforcement against fraud and expand tools to combat voice phishing.
UPDATE (Feb. 9, 10:03 UTC): Adds report to parliament in fifth paragraph, restitution plan in seventh.