Former Samsung Securities Employees Who Sold 'Ghost Stocks' Receive Increased Fines in Appeal Trial

[Asia Economy Reporter Yoo Byung-don] In the appeal trial of former Samsung Securities employees who were convicted in the first trial for selling 'ghost stocks' mistakenly credited to them by the company, additional fines were imposed.

The Criminal Division 1 of the Seoul Southern District Court (Presiding Judge Byun Sung-hwan) on the 13th dismissed both the defendants' and the prosecution's appeals and upheld the original verdict in the appeal trial of eight former Samsung Securities employees, including Gu Mo (39) and Choi Mo (36), who were indicted for violating the Capital Markets and Financial Investment Business Act and breach of trust.

However, the appellate court imposed fines ranging from 10 million to 20 million KRW on four individuals, including Gu, who had received suspended prison sentences in the first trial, stating that "the first trial court omitted imposing fines."

They were indicted for selling stocks mistakenly credited to their accounts after Samsung Securities attempted to pay a cash dividend of 1,000 KRW per share to employee stock ownership in April 2017 but mistakenly paid 1,000 shares per stock instead.

In the appeal trial, Gu and others argued, "Submitting a sell order for stocks acquired by mistake is neither illegal nor fraudulent trading, so it does not violate the Capital Markets Act, and since the sell orders did not actually proceed, causing no damage to the company, it does not constitute breach of trust."

However, the appellate court rejected this, stating, "Their trading behavior is recognized as fraudulent by social standards, and unlike most of the 2,018 shares mistakenly entered, Gu and others sold the stocks, causing Samsung Securities' stock price to fall by 11.7% from the previous closing price and forcing Samsung Securities to spend about 9.5 billion KRW to compensate investors for losses."

The ghost stocks issued due to Samsung Securities' error at that time amounted to 2,812,950,000 shares. Thirteen Samsung Securities employees, including Gu, sold 5.34 million ghost shares worth about 190 billion KRW on the market. However, since withdrawal was only possible three trading days after the stock transaction was settled, the proceeds from the sales were not actually received.

Earlier, the first trial recognized guilt, stating, "Financial industry workers, whose essence is managing others' assets, fundamentally betrayed trust in professional ethics and morality," sentencing Gu and Choi to 1 year and 6 months in prison with 3 years probation, Lee Mo and Ji Mo to 1 year in prison with 2 years probation, and imposing fines ranging from 10 million to 20 million KRW on the remaining four.