[Economic Crime 24 Hours] Deceived by Fake News of 'Stock Listing'... Investment Fraud Leading to Secondary Damage

86 Billion KRW Fraud in Secondary Battery Investment
Second Scam Using Recovery of Damaged Funds as Bait

In the summer of 2022, when secondary batteries began to emerge as a hot topic not only in the industrial sector but also in the stock market.

Complaints started pouring into the Financial Crime Investigation Unit of the Seoul Metropolitan Police Agency. From January to June of the same year, victims who claimed to have been scammed in ‘stock leading rooms’ (chat rooms recommending stock picks) reported to the police. The victims alleged that they suffered losses after purchasing unlisted stocks based on news that ‘a certain battery company's stock would soon be listed.’

The case, transferred from the Seoul Police Financial Crime Unit to the Gyeonggi Nambu Police Agency, was actively investigated by the Bucheon Ojeong Police Station. After confirming that the number of victims exceeded 500 by tracing the inflow routes including the stock leading rooms, the police began to outline the case.

Deceived over 500 people with fake news of ‘stock listing’

The method was quite sophisticated, befitting a crime that deceived hundreds. The battery company in question was experiencing financial difficulties after failing to renew a supply contract with a major corporation. Broker Lee (40) approached the battery company after identifying this and purchased its unlisted stocks at 2,500 KRW per share.

Later, Lee and another broker began spreading rumors about the possibility of a merger involving the battery company's secondary batteries. They posted messages in several stock leading rooms claiming that ‘the battery company's stock listing is soon confirmed.’ They also created fake press releases with similar content and provided them to online media outlets to ensure favorable news coverage. The total number of investors gathered this way reached about 500.

They showed investors pre-manipulated internal company documents and stock trading volumes to encourage investment, selling stocks at 15,000 to 50,000 KRW per share and issuing electronic securities. However, the stock was never eligible for listing and was usually traded at 2,500 to 3,000 KRW per share in the unlisted stock market. After the incident, the price dropped to as low as 500 KRW.

The group sold 540,000 shares using this method, pocketing 8.6 billion KRW. The investors’ losses were laundered by converting the money into points through an application created by a pre-arranged PG company. This was a thoroughly planned crime from start to finish.

After a long investigation, the police arrested four people in November of the same year, including Lee and two brokers, a money laundering agent, and a telemarketing (TM) operator. During police questioning, the two stock brokers, including Lee, admitted all charges.

The police continued the investigation and by the end of last year, 12 people including the 70-year-old CEO of the battery company were also booked without detention. All of them are currently on trial at the Bucheon branch of the Incheon District Court.

Squeezing even dried squid... Secondary crime that made victims suffer twice

Hwang Jaemin (36) was a victim of such stock leading rooms. By the time Hwang realized after going ‘all-in’ on the recommended stocks, he had already lost a significant amount of money. After losing his jeonse deposit and losing contact with the acquaintance who recommended the stock leading room, Hwang felt hopeless about his future.

Then, Hwang received a phone call. The caller claimed to be from the ‘Korea Consumer Agency.’ The call explained a government program established during the COVID-19 period to compensate young people who suffered losses from stock or coin investments. This could have been Hwang’s last lifeline.

Having already been scammed once, Hwang approached cautiously. Above all, he was concerned about compensation being given in coins. At first, he was skeptical. However, after the official explained that compensation would be paid in coins in dollars rather than Korean won to avoid public backlash, and after seeing the coins appear in a program installed on his phone, his suspicion turned into certainty.

What remained for Hwang was to convert the coins into cash. The person who introduced themselves as a Korea Consumer Agency official said that “the procedure is inevitably complicated” and that an ID card and a digital certificate were required. With urgent need to recover his principal, Hwang had no further doubts.

Of course, the so-called Korea Consumer Agency official who approached Hwang was impersonating. Using Hwang’s ID card and digital certificate, they took out a non-face-to-face loan. The amount was 43 million KRW, the maximum limit based on Hwang’s credit. As a result, Hwang ended up with a debt of 43 million KRW he had never even seen.

Although the crime seems unbelievable, the number of victims exceeded 100. The Gyeonggi Namyangju Police Station, which handled the case, estimated the damage at over 3 billion KRW. Considering cases not yet reported or under investigation, the number of victims and the amount of damage are likely to increase.

The mastermind who exploited the desperate situation of stock leading room victims to extort money through secondary damage was Kim (31), an ethnic Korean from China (Joseonjok). Kim evaded police tracking by moving offices monthly, dragging victims down to the bottom.

After persistent investigation, on June 20 of last year, the police raided an office in Yeoksam-dong, Gangnam-gu, Seoul, where Kim’s group was operating. Fourteen people, including Kim, were arrested on site. Among them were people who had joined through online part-time job sites and were forced to work. The police classified the arrested individuals based on their involvement in the crime and cooperation with the investigation.

According to the police investigation, seven people, including Kim, were directly involved in the crime. This group included Kim as the ringleader, executives, and those who were uncooperative during the investigation. The seven arrested were sent to prosecution on June 29, and the remaining seven who were not detained were sent at the end of September. The police also froze about 4 billion KRW worth of funds in their bank and cryptocurrency accounts before indictment. The trial of these individuals is currently ongoing.