About a month after the Financial Supervisory Service declared a special probe to eradicate illegal transactions in virtual assets (coins), a coin designated as a "transaction caution item" on the Korea-based virtual asset exchange Bithumb surged more than 500%. The virtual asset industry calls this "gadori pumping (pumping)."
According to the virtual asset industry on the 31st, Venus (XVS) and Solv Protocol (SOLV) each rose about 500% and 200%, respectively, on Bithumb the previous day. Gadori pumping refers to price rigging in which the price of a virtual asset designated as a transaction caution item on a particular exchange, with deposits and withdrawals halted, is artificially manipulated. Bithumb designated Solv Protocol and Venus as transaction caution items on the 6th and 16th due to security incidents such as hacking.
When a virtual asset is designated as a transaction caution item, deposits and withdrawals are blocked, temporarily limiting the inflow of new supply. Because virtual assets are often listed on multiple domestic and overseas exchanges, if there is a large price gap between exchanges in one place, one can buy cheaply and move to the more expensive venue to seek arbitrage.
However, when deposits and withdrawals are restricted, such activity becomes difficult, and for virtual assets with limited circulation, artificial price rigging is possible with relatively small amounts of money. Price-rigging groups use this to accumulate transaction caution items and then spike trading volume to lure in buyers.
Typically, virtual assets that surge due to gadori pumping often plunge, leaving late-entering investors with heavy losses. Venus and Solv Protocol plunged 76% and 45% the next day. Under current law, those who engage in abnormal trading to conduct price rigging face imprisonment of at least one year or a fine of three to five times the gains obtained from the violation.
The Financial Supervisory Service announced on the 9th of last month that it would eradicate price rigging in the virtual asset market through a special probe. The Financial Supervisory Service also singled out gadori pumping as a target of the unfair-trade special probe. At the time, Lee Chan-jin, governor of the Financial Supervisory Service, said, "We will apply a zero-tolerance principle to unfair conduct."