South Korean financial regulators are launching a probe into suspicious activity on Upbit after the ZKsync token surged by 970% over three hours on February 1.
ZKsync was trading around $0.023 on Sunday morning, South Korean time, ahead of scheduled system maintenance on the Upbit crypto exchange.
At 11:30 am, just before maintenance began, the price rose to $0.24, only to drop back to around $0.023 by 6:30 pm the same day, when the maintenance period ended.
“We are aware that ZKsync experienced a rapid price fluctuation in a short period of time,” a spokesperson for the Financial Security Service’s Virtual Asset Investigation Bureau told South Korean newspaper Hanguk Kyungjae.
“We are looking into the matter and may quickly transition to a formal investigation after determining the severity of the case.”
ZKSync traders formed a “buy wall” ahead of the maintenance as part of a coordinated effort to artificially spike demand for the coin, and force its price up, legal experts told the newspaper.
Upbit data shows trading volumes in ZKsync ballooned by over 4,000% on February 1. By contrast, they rose by a more modest 150% on the same day on the US-based exchange Coinbase, where prices increased by just under 40%.
Nevertheless, the effect on the coin’s price chart was very noticeable.
Almost 40% of ZKsync trades have now been conducted on Upbit, according to CoinGecko. The coin is not often traded in large volumes in South Korea. It accounted for less than 2% of Upbit’s 24-hour trading volume at the time of writing on February 4.
ZKsync is a layer-2 network for Ethereum that uses zero-knowledge proofs to compress large batches of data to make transactions cheaper.
If created artificially, as regulators allege, the price surge may constitute a violation of the 2023 Act on the Protection of Virtual Asset Users, Jin Hyeon-su, a managing partner at the legal firm Decent Law, told Hanguk Kyungjae. The act stipulates that offenders can be jailed for over a year.
It also grants courts the power to fine anyone found guilty of price manipulation an amount equal to five times higher than the profits they made from their illicit activities.
Courts can also impose additional fines if they judge that other traders have suffered financial losses as a result of price manipulation.
“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,” said Jin.
“This likely constitutes price manipulation, collusive trading, and unfair trading.”
Regulators in the country have launched a sweeping crackdown on altcoin price manipulation.
A court in Seoul jailed the CEO of a crypto management firm for three years on February 4 after finding him guilty of manipulating the price of an unnamed coin on the Bithumb exchange in 2024.
Earlier this month, the FSS announced plans to use AI-powered tools to detect efforts to manipulate crypto markets.
