[Asia Economy Reporter Lee Seon-ae] Investment fraud involving overseas unlisted stocks, which lures investors with promises of high returns when listed on foreign securities markets, has been uncovered, requiring special caution.
On the 9th, the Financial Supervisory Service (FSS) stated that overseas unlisted stocks or over-the-counter (OTC) market stocks lack sufficient information about the issuing companies, and information regarding the possibility of listing is also unclear.
Recently, the U.S. Securities and Exchange Commission (SEC) uncovered fraudulent and unfair trading activities by Company A (based in the U.S.) and its owner Lee, who deceived domestic investors by claiming that Company A’s stocks traded on the U.S. OTC market would be listed on the New York Stock Exchange or NASDAQ, thereby embezzling investment funds.
The fraudster Lee recruited stock investors by organizing several investment briefings in Korea from 2019 using intermediaries. He enticed investors with false and exaggerated information that based on Company A’s ongoing projects, there would be enormous investment returns if the company were officially listed on the New York Stock Exchange or NASDAQ in the future.
Using this method, he raised over 20 million dollars from at least 2,000 Korean investors, but most of the Company A stocks delivered to investors were not issued through legally compliant procedures under U.S. law, making them untradeable. He personally embezzled at least 4 million dollars. The SEC is known to have requested orders to prohibit Lee’s violations of securities laws, asset freezes, and recovery of unjust profits.
The FSS advised, "Do not accept exaggerated information about new businesses distributed by the target company and brokers without scrutiny. It is necessary to verify the company’s performance, financial status, and the reality of the business through disclosure documents and news." They also emphasized, "For unlisted companies, it is very difficult to confirm whether listing is being pursued or the performance outlook. Therefore, caution is needed not to be misled by unclear phrases such as planned listing or guaranteed high returns."
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