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Prosecution expands probe into massive stock manipulation scandal

National 13:48 May 04, 2023

SEOUL, May 4 (Yonhap) -- Prosecutors investigating a suspected case of large-scale stock manipulation have secured detailed transaction data for the stocks allegedly used by price manipulators, informed officials said Thursday.

The Korea Exchange's market monitoring office provided the Seoul Southern District Prosecutors Office earlier this week with transaction data, such as bid and ask prices for the stocks in question, and their actual trading records and volumes at the time of suspected price manipulation and crash, the officials said.

The prosecution and the Financial Services Commission have formed a joint team to investigate an investment consulting firm at the center of the recent collapse of stock prices of eight companies.

The stocks of the eight listed companies had been steadily rising since April of last year but began to plummet last week following mass sell-offs through SG Securities Korea Co., the local branch of Societe Generale Group of France.

A person enters a golf academy in southern Seoul on May 2, 2023, which has come under suspicion of being involved in a massive stock manipulation scandal. (Yonhap)

A person enters a golf academy in southern Seoul on May 2, 2023, which has come under suspicion of being involved in a massive stock manipulation scandal. (Yonhap)

The investigation team is analyzing the Korea Exchange data to determine whether there is any reason to suspect stock prices were manipulated through the so-called "order matching" technique and what had triggered the simultaneous crash of the stocks.

Order matching refers to a kind of fictitious transaction in which a buyer and a seller trade stocks at a predetermined price and time. The securities exchange law prohibits order matching, as it can make the concerned stock's trading volume appear bigger that it really is.

The team suspects the consulting firm may have inflated trading volumes and prices through matched orders, then dumped the stocks when regulators began to investigate.

Last week, the combined market cap of the eight companies had plunged about 8 trillion won (US$6.04 billion).

About 100 investors, including singer and actor Im Chang-jung, claimed to have lost a combined 100 billion won after entrusting their investments to the investment company. In particular, Im claimed he lost most of his 3 billion-won investment.

The investigation team has booked Ra Deok-yeon, head of the investment consulting firm, and others on charges of masterminding the suspected stock price manipulation and engaging in unregistered investment discretionary business. It has also received relevant investigation records and their mobile phones, suspected to be used for matched orders, from police.

The 42-year-old Ra and other suspects are also suspected of laundering parts of their investment proceeds, and evading taxes through a golf academy and other entities.

Ra has recognized that he traded the concerned stocks after receiving investors' mobile phones and securities accounts, but denied any act of matching orders. Ra has also claimed he was a victim, pointing to Daou Kiwoom Group Chairman Kim Ik-rae and Kiwoom Securities as the "beneficiaries of the recent stock crash."

Clients of Ra's investment company are reportedly moving to launch civil and criminal lawsuits claiming that criminal proceeds were concealed.

Meanwhile, Prosecutor General Lee One-seok has ordered a thorough investigation into the stock manipulation scandal, saying all people involved in the price manipulation and beneficiaries of unfair gains should be thoroughly identified and sternly punished to ensure trust in the capital market is no longer undermined.

Lee made the remarks after being briefed on the case by the head of the Seoul Southern District Prosecutors Office on Wednesday.


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