[La Deok-yeon Gate] La Deok-yeon Arrested, The Hidden Motive Behind His Continuous Claims of Innocence

“I am also a victim... We must investigate the forces that profited from selling stocks” claim
Attempting to dilute criticism and expand influence by creating a victim frame
Could be a sophisticated strategy to narrow the scope of civil lawsuit liability

On the 9th, the prosecution made a sudden arrest of Ra Deok-yeon (42), CEO of Hoan and a key figure in the Soci?t? G?n?rale (SG) Securities-induced crash, along with two of his aides, accelerating the investigation to uncover the truth behind the incident. The prosecution plans to investigate ▲the circumstances under which eight stocks, including Samchully, Dow Data, and Seoul Gas, which had been rising for a long time, suddenly hit the lower limit in a domino effect on the 24th of last month ▲whether CEO Ra received personal information such as investors' mobile phones and securities accounts and pre-set buy and sell prices to manipulate stock prices ▲the allegation of embezzling criminal proceeds and evading taxes by receiving part of the profits as fees through unrelated corporations ▲and the operation of an unregistered quasi-investment advisory firm to attract investors.

On the 9th, the Joint Investigation Team of the Seoul Southern District Prosecutors' Office Financial Securities Crime Unit, the Financial Services Commission, and the Financial Supervisory Service arrested Ra Deok-yeon, CEO of Hoan, suspected of leading stock price manipulation, along with his close aides Byeon Mo and Ahn Mo at the Seoul Southern District Prosecutors' Office in Yangcheon-gu. Photo by Yonhap News

Investigation Accelerates with Arrest of CEO Ra Deok-yeon and Associates

The Seoul Southern District Prosecutors' Office's Joint Investigation Team on Financial and Securities Crimes, along with a joint investigation team from the Financial Services Commission and the Financial Supervisory Service, made a sudden arrest of CEO Ra Deok-yeon and his closest aides, Byeon Mo (40) and An Mo (33), on the same day. They obtained arrest warrants, judging that if they summoned Ra and others, they were likely to evade or flee. After investigating Ra and others, the prosecution plans to consider requesting detention warrants. Since the 28th of last month, the prosecution has formed a joint investigation team with financial authorities and has been investigating Ra and his associates involved in stock price manipulation as suspects. Related evidence, such as mobile phones presumed to have been used for collusive trading, was also handed over from the police.

On the 9th, the law firm Daegeon, representing about 60 victims of the crash, filed a complaint with the prosecution against six individuals, including CEO Ra and Hoan officials, on charges of fraud and breach of trust under the Act on the Aggravated Punishment of Specific Economic Crimes and violations of the Act on the Regulation of Concealment of Criminal Proceeds. In the complaint, they claimed that "CEO Ra only disclosed investment profits without informing about unpaid debts or loan obligations, resulting in huge debts and the opening of contracts for difference (CFD) accounts without their knowledge."

Regarding this, CEO Ra admitted in interviews with multiple media outlets, including Asia Economy, that operating a quasi-investment advisory firm was illegal. However, he claimed that ▲although he traded using investors' mobile phones and securities accounts, it was not collusive trading ▲he himself was a victim of the recent stock price crash ▲and that the sharp decline was caused by block trades by former Daum Kiwoom Group Chairman Kim Ik-rae and Seoul Urban Gas Chairman Kim Young-min.

Amid 'Definite Stock Price Manipulation' Atmosphere, CEO Ra's Side Submits Petition

Coincidentally, just before the stock price crash, former Chairman Kim Ik-rae and Chairman Kim Young-min sold large amounts of stocks through block trades, raising suspicions that they had prior knowledge of the stock price manipulation and disposed of their shares accordingly. On the 8th, about 50 investors on CEO Ra's side submitted a petition to the prosecution and the Financial Services Commission, requesting a thorough investigation into the circumstances under which former Chairman Kim and others sold stocks at a critical timing. The petition included requests to analyze transaction details related to the eight stocks that hit the lower limit.

While there are victims who defend CEO Ra, the prosecution and the Financial Services Commission are practically convinced of his involvement in stock price manipulation. A Financial Services Commission official said, "We must respond to complaints, but petitions do not require a response and have no binding force," adding, "I don't know why CEO Ra submitted a petition." At a meeting with lawmakers from the National Assembly's Political Affairs Committee, a Financial Services Commission official explained that although no specific individual was mentioned, there is a high possibility of stock price manipulation in this incident. Lawyer Han Sang-jun of law firm Daegeon also stated, "Ra Deok-yeon cannot be a victim."

With the focus shifting to CEO Ra as the main culprit of stock price manipulation, what was his intention behind such statements? In an interview with KBS, YTN, and others on the 27th of last month, CEO Ra said, "I acknowledge responsibility for operating an unregistered investment firm and for conducting margin purchases without investors' consent." He also disclosed his own account, which suffered losses exceeding 4 billion KRW.

The day CEO Ra appeared on broadcasts, the 27th of last month, was when Samchully, Dow Data, and Seoul Gas recorded four consecutive days of hitting the lower limit. On the 24th of last month, eight listed companies hit the lower limit en masse, and that evening, JTBC news pointed to CEO Ra as the mastermind behind the stock price crash. As the lower limit streak continued for these stocks, criticism was directed entirely at him, while he claimed that former Chairman Kim Ik-rae was the cause of the sharp decline. CEO Ra continued to wage a public relations battle through various media, asserting that former Chairman Kim and short-selling forces benefited.

Regarding CEO Ra's claim of being a victim, a financial investment industry insider explained, "CEO Ra is creating a victim narrative because it is advantageous for him to unite with other victims; thus, he is forced to play the victim and side with them." The insider added, "Former Chairman Kim achieved his purpose by announcing his resignation at an emergency press conference and pledging to donate the proceeds from the sale of Dow Data to society."

The prosecution is expected to separately investigate the process by which CEO Ra inflated stock prices and the crash that followed the stock sales by former Chairman Kim and others. They will focus on analyzing over 200 seized smartphones and years of transaction records to uncover illegal elements and prove the scale of direct illicit gains, while also verifying accounts that placed sell orders just before the crash.

Claims of Injustice May Backfire During Investigation and Trial

Ultimately, if it is found that CEO Ra did not sell stocks from accounts under his name or related accounts of employees or acquaintances, he could build a defense in civil and criminal trials. This would support his claim that he merely invested in undervalued stocks relative to corporate value.

There is also an interpretation that CEO Ra's refusal to accept responsibility for the stock price crash is a preparation for civil lawsuits that will follow the prosecution's investigation and trial. Current law imposes fines up to five times the amount of illicit gains from stock price manipulation. In the absence of sufficient economic sanctions such as confiscation and recovery of illicit profits, CEO Ra may fear civil lawsuits filed by victims even more. If the prosecution concludes without clarifying direct responsibility for the crash, the compensation amount in civil lawsuits could increase. A legal industry insider analyzed, "The arrest warrant for CEO Ra cited violations of the Capital Markets Act (price manipulation, unregistered investment discretionary business) and the Act on the Regulation of Concealment of Criminal Proceeds. If only the illegal elements of CEO Ra are investigated and the case is closed, he could bear all the liability for damages from the crash."

Another insider said, "When victims look for defendants in lawsuits, they also consider whether the defendant has the ability to pay compensation. Some law firms are moving to sue securities firms involved in the incident that have the capacity to pay, which is in the same context."

Some point out that CEO Ra's public claims of injustice could backfire during the investigation and trial. If statements made in media interviews are proven false, it will be difficult for CEO Ra and his legal representatives to gain credibility in court. A financial investment industry insider said, "It is unreasonable to say there was no exit strategy while buying large amounts of stocks over a long period. The SG Securities-induced crash occurred because the exit strategy was disrupted and was not properly handled." The insider added, "From CEO Ra's perspective, he may feel wronged, but to a third party, it is just a failed operation. As the investment scale grows, more people get involved and variables increase, creating gaps."

※This SG Securities-induced stock price crash has sounded an alarm for the capital market order. Readers' tips will be a great help in uncovering the truth. We welcome any information regarding investment damage cases, suspicions of stock price manipulation and asset concealment by Ra Deok-yeon’s side, and details about the large-scale sales by major shareholders of Dow Data and Seoul Gas (jebo1@asiae.co.kr). Asia Economy will do its best to establish a transparent capital market order.