‘Unjust Enrichment’ Mun Eun-sang, Former Sillajen CEO, Sentenced to 5 Years Imprisonment and 1 Billion Won Fine in Retrial

Moon Eun-sang, CEO of SillaJen, accused of 'insider trading'
[Photo by Yonhap News]

[Asia Economy Reporter Kim Daehyun] Former ShillaJen CEO Moon Eunsang, who was indicted on charges of obtaining illicit gains through 'fund rotation' using a paper company, was sentenced to 5 years in prison and fined 1 billion KRW in the retrial after remand.

On the afternoon of the 8th, the Criminal Division 2 of the Seoul High Court (Presiding Judge Lee Wonbeom) handed down the same sentence as the original trial before remand to former CEO Moon, who was indicted for violating the Capital Markets and Financial Investment Business Act, among other charges.

The retrial court stated, "According to the Supreme Court's remand ruling, the scale of Moon's breach of trust is recognized as 35 billion KRW," but added, "(Regarding ShillaJen's) actual damage amount, the second trial's judgment is correct, so the same fine is imposed concurrently."

Previously, former CEO Moon was prosecuted for acquiring approximately 35 billion KRW worth of ShillaJen's bonds with warrants (BW) through a 'fund rotation' method using a paper company, thereby obtaining illicit gains. BW refers to bonds that grant the right to purchase the issuing company's stock at a predetermined price within a certain period after issuance.

The first trial sentenced Moon to 5 years in prison and a fine of 35 billion KRW. It stated, "As the CEO of ShillaJen, he led the issuance of BW through fund rotation, causing serious damage and confusion to ShillaJen and the capital market," and "Furthermore, he obtained enormous gains by exercising the warrants," adding, "Nevertheless, he shifted responsibility to others throughout the trial process and failed to reach genuine reflection."

The second trial sentenced him to 5 years in prison but significantly reduced the fine to 1 billion KRW. The second trial court explained, "While being confident in the success potential of Pexaverk (an immuno-oncology drug candidate developed by ShillaJen), he took considerable investment risks, and the BW issuance structure was fully disclosed during the listing review, so ShillaJen's listing cannot be solely attributed to the defendant's violation of the Capital Markets Act," and "The investors' losses ultimately resulted from Pexaverk's clinical failure, and it is difficult to hold the defendant entirely responsible for the clinical failure, among other considerations."

The Supreme Court ordered the case to be retried and reconsidered. It held that if BWs are issued despite the subscription payments not being actually made, unless there are special circumstances, the person responsible for issuing the BWs must be regarded as having violated their duty of care by failing to ensure that all subscription payments are made and effectively attributed to the company.