Gang Involved in Illegal Transactions Embezzling 6.8 Billion Won Caught... Financial Supervisory Service Refers 75 Cases to Prosecutors

[Asia Economy Reporter Koh Hyung-kwang] #1. Four individuals including Mr. A borrowed the entire acquisition funds for Company B from loan companies and others, acquiring the company with no capital and then providing the acquired shares as collateral to the loan companies.

They concealed the fact of the no-capital acquisition by falsely reporting the funds as 'own capital' during reporting to prevent stock price decline and forced sales, and omitted the fact of collateral provision.

Subsequently, they distributed false and exaggerated materials claiming that performance would greatly improve due to new business initiatives such as duty-free shops, artificially raising the stock price and then selling the held shares to gain an unfair profit of 6.8 billion KRW.

#2. Full-time investor Mr. C opened 15 securities accounts under the names of 12 relatives and others with the purpose of obtaining ultra-short-term price differences by selling all stocks bought on the same day on the same day.

Using these accounts for about a month, Mr. C placed wash trades and other price manipulation orders on 79 stocks including Company D, earning an unfair profit of 110 million KRW.

#3. Mr. F, CFO and head of financial accounting and disclosure at Company E, purchased company stocks before the disclosure of improved business performance information he had prior knowledge of, gaining an unfair profit of about 11 million KRW.

The Financial Supervisory Service announced on the 21st that it investigated 129 cases of unfair trading similar to the above examples over the past year, referring 75 cases to the prosecution (for indictment or notification) and imposing administrative measures on 21 cases.

While the proportion of fraudulent trading cases continues to increase, the proportion of insider trading cases has decreased.

By violation type, fraudulent trading accounted for the highest proportion with 18.6% (24 cases), followed by insider trading with 17.8% (23 cases), and price manipulation with 16.3% (21 cases).

This is believed to be due to the focused investigation of complex unfair trading involving no-capital mergers and acquisitions (M&A) and accounting fraud.

Insider trading cases decreased by 6 percentage points (13 cases) compared to the previous year, while price manipulation cases, which had been declining, increased by 4.4 percentage points (3 cases).

Among price manipulation cases, many (17 cases) involved full-time or experienced general investors manipulating prices for trading profits.

An official from the Financial Supervisory Service said, "To prevent investor damage, we distribute major sanction cases of unfair trading and investor precautions every quarter," adding, "We plan to raise awareness among market participants by frequently distributing results of joint inspections on no-capital M&A and illegal short selling measures."