Virtual Asset APIs Prone to Unfair Trading Abuses... Financial Supervisory Service Warns Investors

APIs Enable Automated Trading Based on Preset Conditions
Potential for Abuse in Price Manipulation and Artificially Inflating Trading Volumes

Unfair trading activities involving virtual assets through Application Programming Interfaces (APIs) continue to occur, prompting financial authorities to caution investors.

On April 13, the Financial Supervisory Service issued a notice regarding cases of unfair trading using APIs in the virtual asset market and shared precautions for users.

An API is a system that allows users to automate trading in the virtual asset market, which operates 24 hours a day, without having to directly access the exchange’s trading platform, by enabling automatic transactions based on preset conditions. However, concerns have been raised that APIs are being used to lure users into unfair trades.

APIs can be used as a means of price manipulation. In the virtual asset market, perpetrators may repeat market buy and sell orders to inflate trading volumes, or submit manual limit high-price buy orders to artificially raise prices, thereby enabling manipulators to reap unjust profits.

There are also cases where fake buy orders are repeatedly placed to mislead investors by creating the appearance of large buy order volumes. For example, after submitting a high-price buy order through an API, the manipulator places fake buy orders at prices set at a certain percentage below the current price, making it look as if there is strong buying interest.

There are even cases where APIs are used for matched trades between accounts to distort market conditions. By engaging in wash trading using multiple accounts, manipulators create the illusion of active trading to lure in other buyers, then sell their holdings for profit once prices rise. Additionally, repeatedly submitting high-price buy orders through APIs can push prices up to a target selling price.

API users should be particularly cautious of wash trading. This occurs when a user repeatedly submits small buy and sell orders for a virtual asset in a short period, creating the appearance of active trading, and if these orders are matched against each other, it constitutes wash trading. Continuously submitting and canceling orders with low probability of execution to attract trades may also be regarded as spoofing, which is a form of price manipulation.

Ordinary investors should refrain from chasing virtual assets whose trading volume and price have surged without apparent reason. This is because price manipulation groups using APIs may be involved. If investors buy in after such a surge and the price subsequently plummets, they may incur losses that are not quickly recouped.

An official from the Financial Supervisory Service stated, "We will establish rigorous market monitoring criteria for API orders that may involve unfair trading, and if we detect accounts with excessively frequent transactions via API, we plan to conduct targeted investigations and take strict measures."

This content was produced with the assistance of AI translation services.