[La Deok-yeon Gate] Daesung Family's Second and Third Sons Jointly Hold Shares in Seoul City Gas

Chairman Kim Young-hoon of Samnam's Daesung Holdings Holds 13.2% of Seoul City Gas
Second Son Chairman Kim Young-min Controls Seoul City Gas via Seoul Urban Development
Kim Young-min Sold 100,000 Shares of Seoul City Gas at 456,950 KRW Each on the 17th of Last Month

On the 24th of last month, a flood of forced sell-off orders at the Soci?t? G?n?rale (SG) Securities counter caused eight stocks, including Daesung Holdings and Seoul Gas, to hit their lower price limits en masse. The incident is understood to have occurred after the detained Hoan CEO Ra Deok-yeon and his associates opened contract for difference (CFD) accounts under investors' names and manipulated stock prices through matched orders, but the scheme fell apart.

In the process, high-income investors such as doctors have claimed to have suffered losses, while some major shareholders among the "eight stocks hitting the lower limit" are suspected of having sold their shares in advance to secure huge profits. Kim Young-hoon, chairman of Daesung Holdings, is one such case. It was revealed that Chairman Kim pocketed about 160 billion KRW in cash while his company Daesung Holdings and its affiliate Seoul Urban Gas became targets of CEO Ra. Chairman Kim Young-min also liquidated about 45 billion KRW in cash.

According to electronic disclosures by the Financial Supervisory Service, Chairman Kim Young-hoon and Daesung Holdings began selling shares of Seoul Urban Gas from September last year, cashing out approximately 159.5 billion KRW. They sold shares at around 450,000 KRW per share. Chairman Kim Young-min of Seoul Urban Gas also sold 100,000 shares at 456,950 KRW per share on the 17th of last month, cashing out 45.7 billion KRW. Currently, Seoul Gas’s stock price is hovering around 90,000 KRW. Although this appears unrelated to the recent stock manipulation incident, Kim Young-hoon’s Daesung Startup Investment had previously invested in a company affiliated with CEO Ra about seven years ago.

Chairmen Kim Young-min and Kim Young-hoon are successors of the Daesung Group. The Daesung Group originated from Daesung Industrial Corporation, founded in 1947 by the founder Haegang Kim Su-geun. It is a company specializing in energy businesses such as briquettes, petroleum, city gas, and renewable energy.

Chairman Kim Su-geun passed away in 2001 and divided the company among his four sons and three daughters. The eldest son, Chairman Kim Young-dae, inherited Daesung Industrial and Daesung Combined Holdings. Seoul Urban Gas, one of the companies that hit the lower price limit in the recent SG incident, was entrusted to the second son, Chairman Kim Young-min, while Daesung Holdings (formerly Daegu Urban Gas) was assigned to the third son, Chairman Kim Young-hoon.

However, after the founder’s death, the three brothers engaged in a management dispute. The eldest son, Chairman Kim Young-dae, attempted to sell the shares of Seoul Urban Gas and Daegu Urban Gas held by Daesung Industrial at prices two to three times the market value under the name of a “management premium.” Previously, Daesung Industrial, Seoul Urban Gas, and Daegu Urban Gas had cross-held shares since the founder’s management period. To resolve this and allow the three brothers to manage separately, the founder left a will instructing them to exchange shares at market value, and the brothers agreed to this principle.

In response, Chairmen Kim Young-min and Kim Young-hoon declared joint action, accusing their eldest brother of not honoring their father’s will, and purchased over 50% of Daesung Industrial’s shares. Eventually, Chairman Kim Young-dae sold the shares of Seoul Urban Gas and Daegu Urban Gas at market prices, ending the management dispute for the time being.

In 2009, the eldest son Kim Young-dae and the third son Kim Young-hoon clashed again. This time, the fight was over the use of the “Daesung” name. Kim Young-hoon separated Daegu Urban Gas as a holding company and created Daesung Holdings, which he listed on the KOSPI. However, the following year, Kim Young-dae also listed Daesung Holdings. Kim Young-hoon filed an injunction against his elder brother to prohibit the use of the “Daesung Holdings” name and won in court. Consequently, Kim Young-dae changed the name to “Daesung Combined Holdings.”

Thus, the Daesung family, which had been embroiled in sibling disputes, was legally separated in 2019. At that time, the third son Kim Young-hoon received the “Daesung Group” name and came to oversee a total of 46 affiliates under the corporate group, including Daesung Holdings, Seoul Urban Gas, Daesung Energy, and Daesung Startup Investment. The second son Kim Young-min and the third son Kim Young-hoon are legally recognized as part of the same corporate group.

In terms of governance, Daesung Holdings holds influence as the second-largest shareholder of Seoul Urban Gas. Until early last year, Daesung Holdings held 22.6% of Seoul Urban Gas shares. The largest shareholder, Seoul Urban Development, held 26.27%. Seoul Urban Development is Chairman Kim Young-min’s personal company. Meanwhile, Daesung Holdings shows strong control with Chairman Kim Young-hoon holding 39.9% and R&R holding 32.84%. R&R is a corporation in which Chairman Kim Young-hoon and his eldest son Kim Ui-han hold 99.9% of the shares.

※This stock price crash incident triggered by SG Securities 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, stock manipulation and asset concealment by Ra Deok-yeon’s group, insider details on the mass sell-off by major shareholders of Dow Data and Seoul Gas, or any other related content (jebo1@asiae.co.kr). Asia Economy will do its best to establish a transparent capital market order.