Claims in Civil Lawsuit Petition by Chairmen Kim Ik-rae and Kim Young-min
Reduced Sentences for Crime Participants Reporting? Concerns Raised Ahead of Leniency Implementation
Ra Deok-yeon, CEO of Hoan, who is accused of market manipulation, claimed that his whistleblowers on stock price manipulation embezzled 2 billion KRW from him. This content was included in the complaint filed by CEO Ra against former Dowoom Group Chairman Kim Ik-rae and Seoul City Gas Chairman Kim Young-min.
According to the complaint filed by CEO Ra in June against Kim Ik-rae, Kim Young-min, Kiwoom Securities, and Seoul City Gas, it was stated that whistleblowers A and B, who were involved in the stock price manipulation, extorted 2 billion KRW from CEO Ra through threats and then reported the stock price manipulation to the Financial Services Commission and JTBC.
An industry insider said, "It appears that the whistleblowers threatened not to disclose the stock price manipulation externally and extorted money from CEO Ra," adding, "Ironically, the whistleblowers themselves were also participants in the stock price manipulation."
CEO Ra is under investigation by prosecutors as the main culprit of the Soci?t? G?n?rale (SG) Securities stock price crash incident. The SG incident caused a major controversy as the scale of market manipulation reached 2 trillion KRW, and the manipulation lasted for over a year using Contracts for Difference (CFD).
Following the SG incident, the so-called 'Ilbeolbaekgye Act (Capital Market Act Amendment),' which had been pending in the National Assembly for five years, passed the Legislation and Judiciary Committee despite the Constitutional Court Administration’s opinion of unconstitutionality. Going forward, criminal penalties for stock price manipulators will be strengthened, and leniency and plea bargaining systems (reductions in punishment for self-reporting or whistleblowing on stock price manipulation) will be possible.
The SG incident whistleblower reported Ra Deok-yeon’s group’s stock price manipulation allegations to the Financial Services Commission on April 11 to receive a reward for reporting unfair trading. The whistleblowers extorted money from CEO Ra through threats and then aimed to receive the reward by reporting the stock price manipulation. Regardless of intent, the financial authorities must pay the whistleblower a reward within four months after confirming the measures on the case.
The Financial Services Commission plans to announce a legislative notice for the enforcement decree amendment of the 'Ilbeolbaekgye Act' in the second half of this year. The industry is paying close attention to how the leniency system will be operated. A securities company official expressed concern, saying, "If the leniency system is implemented, whistleblowers can receive reduced sentences even if they were involved in stock price manipulation," and added, "If internal whistleblowing is fully compensated including unjust profits, it could become problematic."
Meanwhile, CEO Ra filed a 500 million KRW damages lawsuit at the Seoul Central District Court against Kim Ik-rae, Kim Young-min, Kiwoom Securities, and Seoul City Gas. In the complaint, he claimed that insiders from Kiwoom Securities and Seoul City Gas informed the two chairmen about the whistleblowing, leading them to sell stocks, which caused losses to him and investors. The defendants have denied all these claims.
CEO Ra and his group are accused of manipulating the stock prices of eight listed companies through collusive trading and other methods, obtaining approximately 730.5 billion KRW in illicit gains. It was also confirmed that from 2019 to April this year, they operated an investment advisory firm without registering with financial authorities and attracted thousands of billions of KRW in investment funds.
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