[Invest&Law] Major Turning Point in SG Incident Trial... 'Whistleblower? Accomplice?' Prosecutors' Dilemma

The trial of the so-called 'Soci?t? G?n?rale (SG) incident,' considered the largest stock price manipulation case in history, has reached a critical turning point. This follows the recent release on bail of the key figure, Ra Deok-yeon (42). Additionally, during the trial, it was revealed that the whistleblower who first exposed the incident was actually Ra’s early business partner and the 'second-in-command' and key conspirator, leading the case into a new phase.

Former CEO Ra Deok-yeon of an investment advisory firm indicted in the 'SG incident'

The Whistleblower in the SG Incident is 'Ra Deok-yeon’s Business Partner'

The SG incident began abruptly on April 24 last year when a massive sell-off occurred in eight stocks, including Daesung Holdings, in the stock market. Unlike typical financial crimes, this sudden market crash happened without any investigation or scrutiny from authorities or investigative agencies. A key figure played a central role in this: Kim (43), the whistleblower who first informed the media and financial authorities about the SG incident. Although he appeared to be a public interest whistleblower, it was later revealed that he was actually Ra’s business partner and considered the second-in-command in the stock manipulation group. The investment advisory firm 'R&K Holdings,' established around March 2020 by Ra, who intended to officially register the firm, was named after the initials of Ra and Kim.

Kim, who said he first met Ra in 2019, introduced himself to others as someone who 'graduated from Korea University with a degree in Public Administration, passed the civil service exam, and was then scouted to work at Lone Star, a U.S. private equity firm.' All of these claims were false. Ra discovered this later, which caused a rift between them, and court testimony revealed that the two frequently quarreled afterward. Kim also directly recruited some investors, and there are indications that he embezzled money or recommended investments in poor-performing stocks related to himself. One such investor, former Vice Chairman Noh Seong-hyun of Youngpoong Paper, filed a lawsuit against Kim, claiming he was defrauded of billions of won during the sale of a theme park in Jeju Island.

Ra’s side argues that Kim, who was under pressure from multiple investors to return funds, maliciously reported the case to claim the financial authorities’ 'whistleblower reward.' At the time, the reward for reporting stock manipulation was up to 2 billion KRW (currently 3 billion KRW). However, according to the Financial Services Commission’s administrative rules, if the whistleblower is indicted as an accomplice or subjected to investigative measures, they can be excluded from receiving the reward. The decision on whether to pay Kim the reward is currently pending.

Core Conspirator Yet Not Indicted for a Year: A 'Mystery'

Kim is a key figure deeply involved in the stock manipulation incident alongside Ra. Nevertheless, more than a year after the incident, he has not been indicted. The presiding judge even remarked, "It is puzzling what position Kim (who appeared as a witness) holds in this case," and pointed out, "Kim may be in collusion or an accomplice with defendant Ra."

The Seoul Southern District Prosecutors’ Office’s Joint Financial and Securities Crime Investigation Division summoned Kim as a 'suspect' for questioning around March. When Kim appeared in court as a witness and was asked if he had participated in market manipulation, he admitted, "I acknowledge that." Despite this, the prosecution’s delay in indicting Kim is believed to be because the investigation into the SG incident is still 'ongoing.' Given the vast scale of the case, Kim’s testimony as a key insider has likely been very helpful. If Kim were indicted, he might stop cooperating to exercise his right to defense.

However, other defendants argue that the prosecution’s 'selective indictment' is unfair. Additionally, investigations into Kim Ik-rae, former chairman of Kiwoom Securities, and Kim Young-min, chairman of Seoul City Gas, who sold large amounts of stock just before last year’s massive crash to avoid losses, have also stalled for a year. Ra’s side suggests that Kim may have colluded with Kiwoom Securities before making the whistleblower report. Kim strongly denies this, stating, "If I even know one person at Kiwoom Securities, I will accept any punishment."

Released Ra Deok-yeon to Face First Non-Detained Trial on the 23rd

The Seoul Southern District Court’s Criminal Division 11 (Presiding Judge Jeong Do-seong) is scheduled to hold hearings on the SG incident case on the 23rd. Ra will attend the trial for the first time since the incident without being detained. The charges against Ra mainly include ▲market manipulation ▲unregistered investment advisory business ▲concealment of criminal proceeds. Ra’s side admits to some of the unregistered investment advisory and concealment charges but completely denies the core market manipulation charge. The first trial of the SG incident, which has lasted for a year, is expected to continue for several more months. The court stated, "The verdict could come as early as December this year or might be delayed until next year."