South Korea Unveils AI-Powered System to Combat Crypto Market Manipulation

The Financial Supervisory Service (FSS) of South Korea has developed an artificial intelligence system to detect and analyze unfair trading practices in real-time. The AI-powered surveillance framework combines generative AI models with machine learning algorithms, allowing it to monitor thousands of tokens traded on multiple domestic and international exchanges.

The new system builds on earlier AI tools introduced by the agency in January 2026, which could automatically flag suspicious order activity and trading windows linked to potential price manipulation. By April, regulators added functionality to identify clusters of connected accounts that may be working together.

Key strengths of the platform include its ability to spot ultra-short-term pump-and-dump schemes, targeting tactics such as 'racehorse' schemes, in which prices are sharply inflated during narrow time windows, and 'cage' or 'pen' schemes involving assets subject to temporary deposit or withdrawal restrictions.