Exchange Launches Corporate Raider-Type Fraud Detection System... 200 Billion KRW Detected in 7 Stocks

Since April, the CAMS System for Detecting Fraudulent Transactions Has Been Operational
Recently, Sophisticated Methods Using Convertible Bonds and Warrants Have Emerged

[Asia Economy Reporter Gong Byung-sun] The Korea Exchange has officially launched a system to detect corporate raid-type unfair trading. It has also achieved the recovery of approximately 200 billion KRW from seven stocks.

On the 10th, the Korea Exchange Market Surveillance Committee (MSC) announced that since April, it has been operating the unfair trading detection system within the Exchange Market Surveillance System (CAMS), achieving the above results. CAMS is a market surveillance infrastructure that systematically analyzes unfair trading such as insider trading, market manipulation, and use of undisclosed information by combining various internal and external data of the exchange.

CAMS manages cases by categorizing them into three levels from Grade 1 to Grade 3 based on the likelihood of unfair trading suspicion through comprehensive analysis of corporate disclosures, stock price trends, trading details, and market actions. Stocks included in Grade 1 are considered the highest risk. In April, 14 companies were classified as Grade 1, 15 as Grade 2, and 75 as Grade 3.

The Exchange conducted detailed analysis mainly on Grade 1 and 2 stocks with a high likelihood of unfair trading suspicion and detected seven cases of large-scale unfair trading. The targeted stocks were small companies vulnerable to external forces acquiring management rights, some of which showed a sharp rise followed by a decline in stock prices. The MSC stated that approximately 200 billion KRW was recovered from these seven companies.

Analysis of the main allegations revealed typical characteristics of unfair trading, including acquisition of management rights, formation of stock price rise themes, large-scale fundraising and external outflows, and obtaining unfair profits through share sales. Cases of market manipulation and use of undisclosed information were also involved in the unfair trading process.

In particular, recently, sophisticated unfair trading methods using convertible bonds (CB) and bonds with warrants (BW) have emerged. In the case of Company A, major shareholders acquired CBs at a low conversion price and induced a sharp rise in stock price through false reports. Afterwards, they sold the converted CB shares at the peak, realizing large trading profits. Company B acquired management rights of listed companies in succession and funneled funds to the company at the top of the governance structure through share exchanges and tangible asset transactions with multiple affiliates.

The MSC stated, “We will continue to advance the detection process of unfair trading cases by strengthening CAMS,” and added, “Based on regular detection results, we will promptly respond to unfair trading and continuously supplement and enhance detection and analysis systems for major types of unfair trading.”

This content was produced with the assistance of AI translation services.