Kyeon Mi-ri's Husband Stock Manipulation 'Not Guilty → Guilty'... Supreme Court Reverses "False Statement of Important Matters"

Purchased Stocks and Convertible Bonds with Loan Funds Recorded as 'Equity'

Actor Kyeon Miri's husband was indicted on charges of manipulating stock prices to gain a large amount of illegal profits, was acquitted in the appeal trial, but the Supreme Court overturned the verdict with a guilty ruling.

Kyun Mi-ri / Photo by Asia Economy DB

According to the legal community on the 16th, the Supreme Court's 3rd Division (Presiding Justice No Jeonghee) overturned the original ruling that acquitted Kyeon Miri's husband Mr. A, who was indicted for violating the Capital Markets Act, along with Mr. B and two others who jointly operated the company with Mr. A, and sent the case back to the Seoul High Court.

Mr. A and others were indicted on charges of artificially inflating the stock price while operating a KOSDAQ-listed company from November 2014 to February 2016, then selling shares received through a paid-in capital increase to gain a profit of approximately 2.37 billion KRW.

In March 2015, during the paid-in capital increase process, the company publicly announced that then-company representative Mr. B and Kyeon Miri each acquired new shares by investing 600 million KRW of their own money. However, it was revealed that Mr. B actually secured the acquisition funds by taking out a loan using previously held shares as collateral, and Kyeon Miri borrowed 250 million KRW out of the 600 million KRW. In December of the same year, Mr. B and Kyeon Miri each borrowed 1.5 billion KRW to acquire convertible bonds, but the company announced that they purchased the convertible bonds with their own funds.

The key issue in the trial was whether falsely disclosing the source of funds for acquiring stocks and convertible bonds, as described above, constitutes unfair trading under the Capital Markets Act. This law prohibits pursuing monetary or property benefits by falsely stating important matters.

The first trial recognized the involvement in illegal false disclosure and sentenced Mr. A to 4 years in prison and a fine of 2.5 billion KRW, and Mr. B to 3 years in prison and a fine of 1.2 billion KRW. However, the second trial acquitted Mr. B and Kyeon Miri, ruling that the disclosure regarding the source of funds for acquiring stocks and convertible bonds could not be considered an "important matter" under the criteria for unfair trading under the Capital Markets Act.

Supreme Court.
Photo by Asia Economy DB

The Supreme Court found this judgment to be erroneous and remanded the case. The Supreme Court stated, "Disclosure regarding the source of acquisition funds is an important matter as it can influence the company's management or investment decisions," and pointed out, "The falsely stated shares account for 1.56% of the total shares, exceeding the 1% threshold that triggers the obligation to report changes."

It continued, "If it is disclosed that Mr. B and others acquired new shares or convertible bonds with their own funds, it creates the perception that the largest shareholder and management have the capacity to supply necessary funds to the company, which can have the effect of supporting the stock price or preventing its decline," and explained, "This is an act of seeking monetary or other benefits through false statements about important company matters."

Furthermore, the court criticized, "The lower court judged that the defendants did not violate the Capital Markets Act because the source of acquisition funds was not an important matter, without examining whether the defendants conspired or participated."