"Claimed 'Invested Because It Was Undervalued'... Court: 'Typical Market Manipulation Behavior'"
[Asia Economy Reporter Yoo Byung-don] A self-made wealthy individual known as a "super ant," who owns stocks worth around 20 billion KRW and is recognized as a small shareholder activist, has been sentenced to a heavy prison term for stock price manipulation.
The Criminal Division 13 of the Seoul Southern District Court (Presiding Judge Shin Hyuk-jae) announced on the 10th that it sentenced Pyo (66), who was indicted for violating the Capital Markets and Financial Investment Business Act, to seven years in prison.
Among the 10 accomplices indicted alongside Pyo, five, including securities firm employee Park (62), were sentenced to prison terms ranging from two to five years, two received one year and six months in prison with three years of probation, and three were acquitted.
Pyo and others were charged with manipulating the stock price of KOSDAQ-listed company A by recommending the purchase of A’s shares to acquaintances, then introducing them to accomplice securities firm employee Park and others, entrusting them with trading authority, thereby controlling 60% of A’s circulating shares and manipulating the stock price.
The group targeted company A because its circulating shares were limited, making stock price manipulation relatively easy.
Some members of Pyo’s group gathered investors through large churches and alumni associations and raised funds via securities firm stock-backed loans. The rest acted as a "supply and demand team," placing price manipulation orders to manage the stock price, systematically dividing roles to boost company A’s stock price.
By securing market dominance over company A’s shares in this manner, from November 2011 to September 2014, they raised the stock price from 24,750 KRW to 66,100 KRW through price manipulation orders that deliberately purchased shares at high prices and spreading false favorable information.
They intended to raise the stock price into the 100,000 KRW range, attract foreign funds, and sell their holdings to retail investors for profit, but the stock price crashed due to the burden of a prolonged rise, thwarting their plans.
After the stock price plummeted, Pyo offered 1.4 billion KRW to price manipulators including Oh (46) to request price manipulation. Although these individuals had no intention or ability to manipulate prices, they took advantage of a coincidental price rebound to pretend they had succeeded in manipulation and pocketed the 1.4 billion KRW from Pyo.
Oh, indicted for fraud under the Act on the Aggravated Punishment of Specific Economic Crimes, had his one year and six months prison sentence confirmed in an appellate trial last July and is currently serving his sentence.
Pyo claimed, "I only recommended investment to those around me because I judged company A’s stock to be undervalued, and the apparently high purchase prices were due to low trading volume," but the court did not accept this argument.
The court stated the sentencing rationale, saying, "This is a typical case of a price manipulator who accumulated stocks to boost the price and then sold them all at once in September 2014 to gain profits. The crime severely disrupts fair price formation in the stock market and causes significant losses to general investors, making the offense very serious."
Active as a full-time investor since the 1990s, Pyo faced bankruptcy during the foreign exchange crisis but re-entered stock investment with money collected from street vending and at one point owned stocks worth around 20 billion KRW. He was also known as a small shareholder activist protesting against companies’ unfair dividend policies.
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