South Korea Jails Crypto CEO for ACE Token Market Manipulation under New Virtual Asset Law
A Seoul court sentenced Jong-hwan Lee, CEO of a South Korean crypto asset manager, to three years in prison after finding he manipulated the price and volume of the ACE token using automated trading and wash trades. The court ruled Lee violated the Virtual Asset User Protection Act (effective July 2024), fined him 500 million KRW and ordered forfeiture of about 846 million KRW. Prosecutors estimated illicit gains of roughly 7.1 billion KRW, though the court partially acquitted on that exact figure citing insufficient evidence. The court attributed 89% of a sudden ACE daily volume surge (from ~160,000 to 2.45 million units between July 22 and Oct 25, 2024) to Lee’s activity. A former employee, Min-cheol Kang, received a two-year prison term suspended with three years of probation. This is the first enforcement action under the Virtual Asset User Protection Act, signifying stepped-up regulatory enforcement against market abuse. The report also flags broader custody risks after prosecutors found a large loss of seized Bitcoin—estimated around 70 billion KRW—possibly due to phishing and operational failures. Traders should note heightened scrutiny on on-chain and off-exchange wash trades, increased legal and reputational risk for small-cap tokens like ACE, and elevated custody and liquidity risk for seized or institutional holdings.
Bearish
The ruling and details of the manipulation are likely bearish for the ACE token specifically. Short-term selling pressure can be expected as on-chain evidence tying a CEO to wash trades and automated manipulation undermines investor confidence and liquidity for a small-cap token. The court’s attribution of 89% of a sudden volume spike to manipulation signals that reported volumes and price moves were not organic, which typically leads traders to de-risk positions and reduces speculative flows. Mid-to-long-term impact depends on continued enforcement and any exchange delistings or withdrawals of liquidity; persistent regulatory scrutiny and potential custody incidents (the seized BTC loss) increase operational and reputational risk for small projects, keeping recovery muted. The broader market impact is limited — the case targets a single token and actor — but it raises systemic caution: traders may reprice small-cap tokens, reduce leverage, and demand higher on-chain transparency and custody assurances.