A group of individuals has been indicted for causing damages of approximately 18 billion KRW to a listed company by inflating the value of a company with no acquisition value and orchestrating its purchase.
On May 13, the Financial and Securities Crime Joint Investigation Division (Chief Prosecutor Ahn Changjoo) and the Financial and Securities Crime Investigation Section (Section Chief Yoon Jaenam) of the Seoul Southern District Prosecutors' Office announced that they had detained and indicted two individuals, including the actual owner of Company A and an M&A broker, on charges including violations of the Act on the Aggravated Punishment of Specific Economic Crimes. Additionally, six other individuals involved in the same crimes, as well as two certified public accountants who participated in the scheme, were indicted without detention for violating the Certified Public Accountant Act.
According to the prosecution, in December 2022, these individuals allegedly caused Company A a loss of 18 billion KRW by inflating the value of a company with impaired capital, leading Company A to acquire its shares.
The actual owner of Company A, facing a crisis such as the risk of Company A being designated as an administrative issue stock, mobilized M&A brokers to find a buyer in order to sell management control.
Another company, Company B, initially wished to acquire the shares. However, Company B also faced financial difficulties and was unable to pay the acquisition price.
As a result, the owner of Company A devised a plan in which Company A would acquire a subsidiary of Company B, and as the acquisition price, Company A would provide convertible bonds to Company B. The representative of Company B would then cash out the convertible bonds and pay the management control acquisition price to the owner of Company A.
The prosecution believes that the owner of Company A forced the company into an unnecessary acquisition in order to personally receive the proceeds from the sale of management control.
The subsidiary that Company A sought to acquire was in a state of capital impairment, with equity capital of minus 2.2 billion KRW. However, the owner and others exploited the fact that the company was unlisted, bribed certified public accountants, and inflated its appraised value to 31.6 billion KRW.
Subsequently, convertible bonds of Company A worth 18 billion KRW were transferred to Company B under the pretext of payment for the subsidiary's shares.
The representative of Company B cashed out the convertible bonds and shared the proceeds with the owner of Company A, the broker, and the certified public accountants.
As a result, in or around April 2023, Company A received a "disclaimer of opinion" from an external auditor, became subject to a substantive delisting review, and even entered rehabilitation proceedings.
The prosecution stated, "This crime has harmed good-faith investors of Company A," and added, "We will continue to respond strictly to crimes that undermine the order of the capital market through the abuse of management control."
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