Supreme Court: "Double Transfer of Stocks Held as Collateral Is Not Fraud"

[Asia Economy Reporter Kim Hyung-min] The Supreme Court has ruled that if a person borrows money using stocks as collateral, fails to repay by the due date, and then double-transfers those stocks, it cannot be considered fraud.

The Supreme Court's 3rd Division (Presiding Justice Noh Jeong-hee) overturned the original ruling that sentenced Mr. A, who was indicted on charges including breach of trust, to six months in prison with a one-year probation, and remanded the case to the Seoul Central District Court on the 25th.

In 2016, Mr. A entered into a loan agreement and stock transfer collateral contract with victim Mr. B, borrowing 50 million won by pledging 12,500 shares of his company’s stock (worth about 76 million won) as collateral. If the loan was not repaid by the due date, ownership of the stocks had to be transferred.

However, contrary to the agreement, Mr. A failed to repay the loan two months after the due date, and investigations revealed that three months later, he even transferred the stocks to another person again.

The prosecution argued that since Mr. A already had debts exceeding 2 billion won, he had no intention or ability to repay the loan from the start. Therefore, in case the breach of trust charge was not recognized in court, they also provisionally applied fraud charges and brought Mr. A to trial.

The first trial court acquitted Mr. A, ruling that neither breach of trust nor fraud charges could be applied. The prosecution appealed, insisting that at least the fraud charge should be upheld, and the second trial court accepted this and found him guilty.

However, the Supreme Court reversed the decision again. It ruled that since Mr. A validly provided stocks worth more than the 50 million won loan as collateral, the fact that he later double-transferred the stocks to a third party alone does not mean the collateral was insufficient, nor does it easily prove intent to defraud (deceive and take property).

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