J.Estina CEO Indicted and Detained... "Massive Stock Sell-off Before Disclosure of Deficit Performance"

[Asia Economy Reporter Yoo Byung-don] Kim Ki-seok, CEO of J.ESTINA, has been brought to trial on charges of avoiding losses by selling shares he held before disclosing deficit performance.

The Financial Investigation Division 1 of the Seoul Southern District Prosecutors' Office (Chief Prosecutor Lim Seung-chul) announced on the 7th that it has indicted Kim Ki-seok, CEO of J.ESTINA, Executive Director Lee, and the J.ESTINA corporation for violating the Capital Markets Act (prohibition of insider trading using undisclosed important information).

CEO Kim is the younger brother of Kim Ki-moon, the largest shareholder of the company and chairman of the Korea Federation of SMEs. Before the company disclosed that it had posted losses for two consecutive years last year, Kim sold a large number of shares he held. From February 1 to February 12 last year, Kim sold a total of 346,653 shares through off-hours trading and on-market transactions. The total amount of shares sold reached approximately 3 billion KRW.

On February 12, the last day of Kim's large-scale sale, after the market closed, J.ESTINA disclosed that its annual operating loss had expanded 18 times from the previous year to 860 million KRW. Subsequently, the stock price, which was around 8,190 KRW, fell to the 5,000 KRW range about a month later in March.

It was also found that the J.ESTINA corporation sold tens of billions of KRW worth of its own shares.

The prosecution reportedly received the case from the Securities and Futures Commission under the Financial Services Commission and has been investigating the related matters. In November last year, they conducted a search and seizure at J.ESTINA's headquarters, and on the 19th of last month, they arrested Executive Director Lee, who was responsible for disclosures, along with CEO Kim. Kim's first pretrial hearing is scheduled for the 5th of next month at the Seoul Southern District Court.

When these allegations were first raised, J.ESTINA denied the insider trading charges, stating that "the shares were sold to raise funds to pay taxes."

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