[Exclusive] "Friend Who Lost 10 Billion Won, I Call Every Day Fearing He Might Be Dead" [War Against Stock Manipulation]

①-⑴ "I Thought It Was Value Investing"
Raising Investors Targeting High-Income Earners in Gangnam
Only Debt Left, No Profit Distribution
Stricter Punishments Needed to Reduce High Recidivism Rates

"I call the friend who recommended the investment every day. I'm worried he might be dead... That friend lost nearly 10 billion won."

Mr. Lee, who was driven to the status of a credit defaulter due to the 'Ra Deok-yeon Gate,' spoke with difficulty. After several attempts to persuade him, we finally met on the afternoon of the 14th at a location in Gangnam, Seoul. In his 60s, he began by explaining how he fell victim to Ra Deok-yeon's scheme. In December 2022, while looking for investment opportunities, a friend mentioned value investing. The structure was that if he handed over a mobile phone opened under his name, the friend would find undervalued stocks, invest on his behalf, and share half the profits. This was during a period when the real estate market was declining and interest rates were rising, marking the start of a full-scale asset market downturn.

A victim of the La Deok-yeon stock manipulation case met at an undisclosed location in Gangnam, Seoul, talks about the details of the damage and life after the incident. Photo by Heo Young-han younghan@

Believed it was value investing... Did not realize price manipulation

"I thought it was an investment agency service. I also deal with asset management companies, and when I ask them which stocks they buy or sell, they don't tell me; they just handle it all. I understood it in that way."

It was puzzling that he entrusted several hundred million won to Ra Deok-yeon, CEO of Hoan Investment Advisory, who was known only for holding a fund manager qualification and was not a prominent figure in the investment industry. He said, "The starting point for recruiting investors was the hospital."

Current hospital director Joo Mo, accused of participating in Ra Deok-yeon's stock price manipulation and recruiting investors, brought in doctors, and Ra Deok-yeon legally acquired a golf course in Gangnam, Seoul. They used this location to attract investments. Ra Deok-yeon's group exploited the 'in-group culture' of high-income and professional circles in Gangnam. Their 'distinction culture' of belonging to an exclusive world further fueled investor recruitment.

"We met through a CEO gathering, and 90% of those who entrusted investments to Ra Deok-yeon's group were businessmen, including doctors."

He only realized after Ra Deok-yeon was arrested that the mobile phone was used to conduct collusive trading across eight areas including Cheongdam-dong, Gangnam-gu, Seoul. He said he never suspected that his investment was used for price manipulation rather than value investing. Although he entrusted his stock account and ID to Ra Deok-yeon's group, he was unaware of any price manipulation.

"The stock price didn't surge suddenly. It rose steadily by 1-2%, so I never thought it was involved in price manipulation. Usually, price manipulation involves a sudden spike and drop."

He could not bring himself to say, "I am also a victim of price manipulation," in response to social views that he colluded in price manipulation or that it was a result of personal greed. Even now, there is debate over whether those who joined the investment by handing over their phones are complete victims. The Electronic Financial Transactions Act prohibits giving or receiving access media such as public certificates or account passwords to others. Violations can result in imprisonment of up to five years or fines up to 30 million won.

"They said they would manage the money. Since I held the bankbook, they said they couldn't play tricks. I thought they were trading using an artificial intelligence (AI) program."

He believed there was no room for fraud because the bankbook with the invested funds was in his possession, allowing him to check the principal at any time. He frequently checked the balance on the Account Info application operated by the Korea Financial Telecommunications & Clearings Institute, and since the balance fluctuations were small, he trusted and entrusted the funds.

He only realized which stocks Ra Deok-yeon had invested in after receiving shareholder meeting notices. Early last year, he requested information on the stocks invested by Ra Deok-yeon's group and asked to get his phone back. The response was plausible: "They said if everyone invests in these stocks thinking they are good, it could disrupt the market. I believed that."

Ra Deok-yeon used credit without consent and even engaged in CFDs... Account shows -320 million won remaining

The price for entrusting investments to Ra Deok-yeon was harsh. "Even though I have traded stocks for over 10 years, I had never used credit. I accept the greed for the principal. But at least for the credit part, the securities company never called to ask if it was okay to use credit." His voice grew agitated at this point.

Ra Deok-yeon used credit at Shinhan Investment Corp. without his consent, and the balance, initially 200 million won, included both principal and debt, showing -320 million won. Suddenly, like being struck by lightning, the principal was lost, and he had to bear the interest on the credit loan. There was never any profit distribution from stock price increases. He searched his entire house and found documents sent when signing up with Shinhan Investment Corp. He discovered he had not checked the consent box for using credit and pointed out procedural issues during the credit loan transaction process at the securities company. He pleaded with the Financial Supervisory Service to withhold the debt portion that Ra Deok-yeon used without consent, but it was not accepted.

"Ra Deok-yeon signed a document admitting it was his fault for using credit and operating CFDs without investor consent. I want to sue the securities company, but I can't afford it."

The securities company promptly filed provisional seizures and auctions to threaten him and handed the case over to debt collection. He received daily calls demanding repayment. He developed depression and was expelled from the credit society. He could neither use nor obtain a credit card under his name. "Many places don't accept cash. Once, while driving with friends, the Hi-Pass didn't register. That's when I realized my card transactions were blocked. It was so embarrassing."

He said his situation was relatively better. "Among the victims, there are at least five people who lost over 10 billion won."

"A friend who lost 100 million won said he was less affected because he lives in Bucheon." Ra Deok-yeon's group rarely visited Bucheon, Gyeonggi Province, due to distance, even though they used the Cheongdam-dong golf course in Gangnam as the base for price manipulation.

Could not bring himself to tell his son about the damage... Many lost even their homes

"Friends who did CFDs ended up with double negatives, including principal and margin debt."

An acquaintance who invested 13 billion won suffered losses that ballooned to 26 billion won, and someone who entrusted 3 billion won ended up with 6 billion won in debt. Over the past year, only the first trial has proceeded, and in the meantime, some lost their homes. Business owners who couldn't pay loan interest had their extensions denied, cutting off their funds.

"An acquaintance who lost about 8 billion won actually lost assets worth 20 billion won due to forced liquidation."

"I couldn't even tell my son or friends that I lost money due to Ra Deok-yeon's price manipulation..." His heavily made-up face briefly darkened as if trying to erase the harsh year. Labeled a credit defaulter by society and cut off from family, relatives, and acquaintances, they gradually became isolated from home and society.

"Those who borrowed money from their children and relatives lost even their children's homes. Friends became enemies. If my friend introduced me and lost 10 billion won, would I think well of that friend?"

He recalled April 24 last year, when eight stocks including Dow Data, Seoul Gas, and Samchully simultaneously hit their lower price limits. "What angers us most are the owners of those eight stocks hitting the lower limit. Investors lost 800 billion won, but former Dow Kiwoom Group Chairman Kim Ik-rae realized profits. They made money by killing us. They said they would return 60 billion won? Still no news."

Former Chairman Kim was revealed to have made a profit of over 60 billion won from sales two days before the SG Securities crash, sparking controversy. Subsequently, suspicions arose that Kim used insider information, and prosecutors launched an investigation, but Kim was never summoned for questioning.

He criticized the penalties for unfair acts such as price manipulation as too lenient. "Because the punishment is too weak, even if they are punished, they commit fraud again and again. Why else would Kwon Do-hyung desperately try to come to our country? That's the real problem."

He pointed out that even those who commit heinous securities crimes can be released after serving a maximum of 15 years in prison. "Will Ra Deok-yeon not commit fraud again? Our country's laws are too lenient on economic criminals. Only individuals suffer, and society becomes distrustful. If caught manipulating stock prices, life is over. We need to set an example."

At the end of the hour-long interview, what he emphasized most was strengthening penalties for unfair trading practices. He hoped that scammers disguised as investors would not embezzle investment funds and that no one would live a negative life like his.

Editor's NoteThe 'Ra Deok-yeon Gate,' the largest stock price manipulation crime in history (total illicit gains of 730.5 billion won), is approaching its first anniversary (April 24, 2023), yet victims' nightmares continue. There are no effective victim remedies in the Korean capital market. Litigation is the only option but is daunting due to cost and difficulty proving damages. The amendment to the Capital Markets Act, which supplements the limits of criminal punishment and introduces effective financial sanctions due to the 'Ra Deok-yeon Gate,' is significant. However, to eradicate the continuously increasing securities crimes in various forms, it is necessary to establish a system for efficient detection and investigation and to improve additional systems for swift and strict sanctions. The Asia Economy Securities Capital Market Department's special investigation team examines advanced systems in overseas capital markets and reviews challenges and directions for our market to suppress securities crimes. As intelligent and organized criminal acts occur, we seek effective measures for investor damage relief.

We plan to intensively report from various perspectives on unfair trades such as insider trading, fraudulent transactions, price manipulation, and reporting violations. We will strive to establish comprehensive countermeasures to eradicate capital market crimes. Please send tips to (lsa@asiae.co.kr). We will investigate and report thoroughly.

▲Team Leader Seon-ae Lee, Manager △Min-young Kim, Yoon-joo Hwang, Min-young Cha, Dae-hyun Kim, Reporters