'La Deok-yeon Gate' 1 Year... The Unending 'Nightmare' [War Against Stock Price Manipulation]

Asia Economy Special Project - War Against Stock Price Manipulation

①<The Never-Ending Nightmare>
②<Strict Punishment in Capital Advanced Countries>
③<Evolving Stock Price Manipulation>
④<No Investor Damage Relief in Korea>
⑤<To Eradicate Securities Crime>

It has been almost one year since the largest-ever stock manipulation crime, the "Ra Deok-yeon Gate" (April 24, 2023), involving a total illicit gain of 730.5 billion KRW, occurred. Ra Deok-yeon, CEO of Hoan Investment Advisory, and his associates deny the allegations of market manipulation, making the proof of the crime and recovery of illicit gains the biggest challenges. Victims watching the trial still live in a nightmare. Since the revision of the Capital Markets Act in July last year, it has become possible to impose fines up to twice the amount of illicit gains obtained through unfair trading, or up to 4 billion KRW if there are no illicit gains or if they are difficult to calculate. However, there are no effective victim relief measures in the Korean capital market. Those burdened with huge debts have been driven to the edge and rushed to rehabilitation courts. Litigation is the only answer for victims, but due to cost burdens and difficulties in proving damages, many cannot even consider it. Moreover, since individual civil lawsuits are practically difficult, the securities-related class action system implemented in 2005 is also ineffective due to excessive procedural restrictions. As intelligent and organized criminal acts occur, it is essential to establish victim relief measures for investors.

Furthermore, the amendment of the Capital Markets Act, which supplements the limitations of criminal punishment through the "Ra Deok-yeon Gate" and introduces effective monetary sanctions, is significant. However, to eradicate securities crimes that continue to increase in various forms, it is necessary to build a system that can efficiently detect and investigate such crimes and to improve the system further for swift and strict sanctions. The Asia Economy Securities Capital Market Department Special Coverage Team examines the systems of advanced overseas capital markets and reviews the challenges and directions our market must take to suppress securities crimes. We also seek effective measures to provide relief to investors. Through comprehensive institutional improvements, we aim to promote the enhancement of trust in our capital market.

We plan to intensively report from various perspectives on all kinds of unfair trading, including insider trading, fraudulent transactions, market manipulation, and violations of reporting obligations. We will strive to establish comprehensive countermeasures to eradicate capital market crimes. Please send tips to lsa@asiae.co.kr. We will investigate thoroughly and report to the end.

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