xThe price of Bitcoin is displayed on a screen at lounge of Bithumb in Seoul, March 10. Yonhap

Concerns are growing that Korea has become a playground for cross-border speculators in the cryptocurrency market. Last month, fluctuations in the value of the altcoin Avail on Bithumb raised suspicions of possible borrowed-name transactions by foreigners and price manipulation.

Financial authorities here are investigating market manipulation accusations against Avail, as its price plummeted shortly following its listing on the country's second-largest cryptocurrency exchange.

This marks the first investigation conducted under the Virtual Asset User Protection Act, which regulates unfair trading practices and came into effect on July 19.

Avail is developed by Polygon, a popular platform in the blockchain ecosystem, which ranks 21st by market capitalization globally, with a market cap of approximately $4.2 billion.

It was listed on some cryptocurrency exchanges within and outside the country on July 23.

On Bithumb, it started trading at 236 won ($0.17) and skyrocketed to 3,500 won in just 15 minutes, marking an astonishing increase of 1,383 percent. However, by around 3 p.m. the next day, it plummeted to around 296 won.

This led to allegations of market manipulation, considering the price discrepancy with overseas exchanges. When Avail surged to 3,500 won on Bithumb, it was trading in the low 200-won range on global exchanges like Huobi.

Even considering the typical "pump effect" that often accompanies a new listing, the price surge was deemed as excessive. The financial authorities believe this suggests abnormal trading activities.

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The case has attracted significant attention as it brought suspected borrowed-name transactions by foreigners to the fore.

According to industry sources, an unnamed investor, presumed to be a Korean national, is believed to have led the suspected transactions on Bithumb. About 40 minutes before Avail's listing on that exchange, this person posted on X, formerly Twitter, seeking to gather Avail tokens from foreigners.

This investor collected more than 1.2 million tokens, worth approximately 4.2 billion won, from foreigners through this post. This amount represents 80 percent of the 1.55 million tokens that were circulated on Bithumb on the first day of listing, which seems to be enough to potentially manipulate the market price.

Unlike traditional currencies, which can only be exchanged through banks, cryptocurrencies can be transferred with a financial transaction app called a digital wallet.

In Korea, cryptocurrency trading by foreigners is strictly prohibited.

The investor in question received Avail tokens from a total of 119 digital wallets via the social media, suggesting that up to 119 foreigners may have engaged in proxy trading through this investor.

In this process, that person is believed to have earned commissions of up to 3.6 billion won, the sources said.

They said, despite restrictions against foreigners' cryptocurrency trading, circumstances show that covert attempts are continuously being made to facilitate proxy trading for foreign investors.

"While the abundant liquidity of domestic cryptocurrency exchanges can be a competitive advantage internationally, it can also be a factor that leads to unfair trading practices in an immature market," an official within the domestic cryptocurrency industry said.

He said that without institutional safeguards, market disruptions by some foreign investors would persist and domestic individual investors will continue to suffer losses.

Park Sung-jun, director of the Blockchain Research Center at Dongguk University in Seoul, said, "The ease with which market manipulation can be carried out is a significant concern. There is an urgent need for technical improvements to swiftly detect unusual trading activities."

The incident has also provoked criticisms against Bithumb for its failure to adequately monitor unusual trading activities and take any significant measure to protect investors, while Avail skyrocketed by nearly 1,400 percent within just 15 minutes after its listing.

Regarding this, a Bithumb official said, "We conduct 24-hour monitoring of the cryptocurrencies we support for trading. We maintain constant communication with financial authorities and have carried out both fact-finding and monitoring in relation to this matter."