South Korea Probes ZKsync After 970% Price Surge Sparks Manipulation Concerns on Upbit

TLDR:

• ZKsync surged 970% to $0.24 on Upbit before crashing back to $0.023 within nine hours on February 1. 
• Trading volumes on Upbit exploded 4,000% compared to just 150% on Coinbase during the same period. 
• Violators face over one year in prison and fines up to five times their profits under Korean law. 
• South Korea deploys AI-powered tools to detect crypto manipulation amid broader crackdown on exchanges.

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South Korea’s Financial Supervisory Service has initiated an investigation into suspicious trading activity surrounding the ZKsync token on Upbit exchange.

The digital asset experienced an extraordinary price spike of 970% within three hours on February 1, raising concerns about potential market manipulation.

Authorities are examining whether coordinated trading efforts violated the country’s virtual asset protection laws, which carry penalties including imprisonment and substantial fines for offenders.

Coordinated Trading Activity Triggers Regulatory Response

The ZKsync token began trading at approximately $0.023 on Sunday morning before scheduled maintenance on Upbit, South Korea’s largest cryptocurrency exchange.

At 11:30 am, just before the maintenance window commenced, the price surged dramatically to $0.24. However, the token plummeted back to its original price level of around $0.023 by 6:30 pm when maintenance concluded.

A spokesperson from the Financial Security Service’s Virtual Asset Investigation Bureau addressed the incident in a statement to Hanguk Kyungjae newspaper.

“We are aware that ZKsync experienced a rapid price fluctuation in a short period of time,” the official said. The regulator added, “We are looking into the matter and may quickly transition to a formal investigation after determining the severity of the case.”

Legal experts suggest traders formed a coordinated “buy wall” ahead of the maintenance period to artificially inflate demand. Trading data from Upbit reveals volumes for ZKsync exploded by over 4,000% on February 1.

In contrast, the same token saw a modest 150% volume increase on Coinbase, where prices rose by just under 40%. The stark difference between exchanges indicates concentrated activity on the Korean platform.

According to CoinGecko data, nearly 40% of all ZKsync trades now occur on Upbit. Despite this concentration, the token represents less than 2% of Upbit’s total 24-hour trading volume.

ZKsync operates as a layer-2 network for Ethereum, utilizing zero-knowledge proofs to compress transaction data and reduce costs.

Legal Implications and Broader Crackdown

Jin Hyeon-su, a managing partner at Decent Law, explained the activity potentially violates the 2023 Act on the Protection of Virtual Asset Users.

The legislation allows courts to impose prison sentences exceeding one year for market manipulation. Offenders also face fines reaching five times their illicit profits, with additional penalties possible if other traders suffered losses.

Jin analyzed the trading patterns observed during the incident. “A large number of buy orders were concentrated in a short period of time on February 1, followed quickly by a release of volume afterwards,” he stated. Jin concluded, “This likely constitutes price manipulation, collusive trading, and unfair trading.”

South Korean authorities have intensified enforcement actions against cryptocurrency market manipulation. A Seoul court recently sentenced a crypto management firm CEO to three years in prison for manipulating an unnamed token on Bithumb exchange during 2024. The conviction demonstrates regulators’ commitment to prosecuting market abuse.

The Financial Supervisory Service announced plans earlier this month to deploy AI-powered surveillance tools for detecting manipulation attempts.

These technological measures aim to identify suspicious trading patterns more efficiently across Korean exchanges. The enhanced monitoring capabilities represent a significant expansion of regulatory oversight in the country’s digital asset markets.

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