Lawyer Hansangjun: "No System to Return Seized Market Manipulation Funds to Victims" [War on Stock Price Manipulation]

①-⑷'Radeokyeon Victim' Criminal Case Handled by Daegun Law Firm Representative Lawyer
Over 80 Criminal Complaints Filed... Maximum Damage 2 Billion KRW Per Person
Pain from Social Stigma as Accomplice, Not Victim
Criminal Complaints Submitted 3 Times but No Indictment

"There is no system in place to confiscate funds used for market manipulation and return them to the victims."

Han Sang-jun, lead attorney at the law firm Daegeon, who is handling the criminal complaints of investors harmed by the Soci?t? G?n?rale (SG) Securities stock crash incident, pointed out in an interview with Asia Economy that even if victims are recognized as fraud victims, there are no legal or institutional measures to protect them during the restitution process. Han emphasized, "The biggest problem is that unfair trading is a case with victims, but there is no procedure to return confiscated or seized criminal proceeds to the victims."

Currently, more than 80 investors have approached Han Sang-jun’s office. The damage amounts to 170 billion KRW. Han said, "In the fraud cases I have handled so far, the damage per victim was usually between 70 million and 150 million KRW, but in the Ra Deok-yeon incident, the damage per person exceeds 2 billion KRW," adding, "Because Ra Deok-yeon leveraged investments through Contracts for Difference (CFD) accounts opened without investors' consent, the investment losses doubled." One victim, Mr. A, invested 13 billion KRW but suffered losses amounting to 26 billion KRW.

Han defined the incident orchestrated by Ra Deok-yeon and his group as a "Ponzi scheme combined with market manipulation and fraud." He explained, "On the surface, it appears to be a crime related to market manipulation violating the Capital Markets Act, but behind the scenes, it involved embezzling investors' money during the process of raising funds for market manipulation."

A Ponzi scheme is a multi-level financial fraud where returns to existing investors are paid using funds from new investors. Han explained, "Usually, market manipulation is conducted by one person over a few months, but in the Ra Deok-yeon case, they bought Group B stocks with Group A’s money, then bought Group stocks with Group B’s money, gradually raising the stock price over three years."

Han Sang-jun, the lead attorney at Daegun Law Firm handling the criminal complaints of the victims in the 'Ra Deok-yeon incident,' is being interviewed by Asia Economy. Photo by Heo Young-han younghan@

Ra Deok-yeon Group Twisted into a Value Investment Frame

Ra Deok-yeon’s group, which had been systematically manipulating stock prices for three years, deceived socially trusted professionals such as doctors and entrepreneurs by claiming to engage in value investing by finding undervalued stocks. Han said, "Ra Deok-yeon approached famous celebrities, entrepreneurs, and doctors," adding, "One out of every two victims is a doctor."

They promised that once the stock trading profit rate reached 50%, half of the remaining amount would be taken as a commission by themselves and the other half returned to investors, but most victims reinvested the profits as instructed by Ra Deok-yeon’s group.

Han said, "There were many accusations that victims were on the same level as perpetrators, suggesting that they knew everything, provided their phones, and participated in market manipulation," adding, "The social stigma is the hardest part for the victims."

Regarding the criticism that handing over mobile phones registered under their own names might be illegal, he argued, "They probably thought they were doing personal entrusted trading. They were strictly told never to say it was market manipulation and were incited to switch to blue-chip stocks. Those who instigated this are accomplices, but 90% of others probably thought they were just making money through entrusted trading."

Han emphasized, "If someone was truly in the perpetrator’s position, they would never have come to our law firm," adding, "Those classified as accomplices were mostly arrested or indicted along with Ra Deok-yeon, and due to the nature of this case, security was key. The moment information related to market manipulation leaked, a search and seizure would have been conducted immediately." This is also why about 80 investment victims are pushing for criminal complaints.

Victims Exist, but Damages Confiscated to the Treasury

He viewed it as unreasonable that although victims clearly exist, all investors are framed as accomplices and all investment damages are confiscated to the national treasury. Han said, "For even a part of the unfair gains taken by Ra Deok-yeon to be returned to the victims, Ra Deok-yeon must be convicted of fraud," adding, "I am confident that if prosecuted, he will be found guilty. We have filed criminal complaints three times, but the prosecution has never indicted him," expressing frustration.

He also criticized the investigation procedures and methods of the financial authorities regarding unfair trading. Han said, "It takes too long to recognize market manipulation and decide how to proceed with investigations," adding, "The Financial Supervisory Service has no compulsory investigative authority, and the investigative powers of the Financial Services Commission are very weak compared to the U.S. Securities and Exchange Commission (SEC). They cannot conduct communication inquiries or impose travel bans."

Han Sang-jun, the lead attorney at Daegun Law Firm handling the criminal complaints of the victims in the 'Ra Deok-yeon incident,' is being interviewed by Asia Economy. Photo by Heo Young-han younghan@

With the current authority of the financial authorities, investigations are limited and slow due to procedural reasons, resulting in a very low number of detected market manipulation cases. Han pointed out, "According to last year’s data, only two cases of market manipulation were detected," adding, "There cannot be only two cases. Either not all market manipulation acts were caught, or money laundering occurred while deciding whether to investigate, and evidence was not preserved, leading to acquittals even after prosecution."

He further explained that when the Capital Markets Act was amended after the Ra Deok-yeon incident broke out last year, there should have been in-depth discussions and revisions regarding restitution procedures for victims and strengthening investigative powers.

Finally, he pointed out that the recovery procedures related to criminal proceeds should be carried out more swiftly. Han said, "In our country, even after criminal trials are finalized, it takes a considerable amount of time to return confiscated and seized criminal proceeds to fraud victims through the 'criminal proceeds restitution' process," adding, "There is no regulation on how long this should take, so victims have no choice but to wait for years. It is necessary to introduce parts of victim relief procedures from countries like the U.S. into domestic law."

Editor's NoteThe 'Ra Deok-yeon Gate,' the largest stock manipulation crime in history (total unfair gains of 730.5 billion KRW), is approaching its first anniversary (April 24, 2023), yet the victims’ nightmare has not ended. There are no effective victim protection measures in the Korean capital market. Litigation is the only option, but due to cost burdens and difficulties in proving damages, many do not even attempt it. The amendment of the Capital Markets Act, which supplemented the limitations of criminal punishment and introduced effective monetary 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 that can efficiently detect and investigate these crimes and to improve additional systems for swift and strict sanctions. The Asia Economy Securities Capital Market Department Special Investigation Team examines advanced systems in overseas capital markets and reviews the challenges and directions for our market to suppress securities crimes. Additionally, as intelligent and organized criminal acts occur, we seek effective measures to protect investors.

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

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