"Overseas Lawsuit Concealment Detected" STX Trading Suspended on July 3

SFC Decides on Fines and Prosecutorial Notification for STX and Affiliates
Trading Suspended Amid Allegations of Accounting Violations
Unrecognized Provisions and Contingent Liabilities Total Over KRW 140 Billion
CEO Dismissal and Audit Designation Recommended by SFC

On July 3, trading of shares in the general trading company STX and the shipping and logistics company STX Green Logis was suspended due to allegations that they intentionally violated accounting standards. In relation to this, the Securities and Futures Commission (SFC) of the Financial Services Commission has already decided to notify the prosecution and impose fines on STX.

The Korea Exchange announced that it had requested an inquiry disclosure from STX and STX Green Logis regarding media reports of accounting standard violations, and that trading of their shares would be suspended on this day. The deadline for the inquiry disclosure is 6:00 p.m. on the same day.

At its 13th meeting held the previous day, the SFC resolved to impose fines, designate an auditor for three years, and recommend the dismissal of the CEO and suspend duties for six months for STX and STX Marine Service. The company, its current CEO, and former CEOs were also reported to the prosecution. The final amount of the fines will be determined later by the Financial Services Commission.

According to the SFC, STX failed to recognize provisions for overseas lawsuits filed against its subsidiaries in 2022 and 2023 in its financial statements, nor did it disclose contingent liabilities in the notes. The unrecognized provisions and contingent liabilities amounted to approximately KRW 97.5 billion in 2022 and about KRW 44.2 billion in the first quarter of 2023.

Additionally, STX is suspected of submitting a securities registration statement in July 2023 that included financial statements for 2022 and the first quarter of 2023 which violated accounting standards, thus making false disclosures. The SFC also determined that STX hindered proper external audits by omitting information on lawsuits against its subsidiaries from the litigation details provided to external auditors.

STX Marine Service, which is an unlisted company, was also found to have omitted disclosures of provisions and contingent liabilities related to lawsuits, and to have hindered external audits by providing audit materials that excluded information on overseas lawsuits.