Supreme Court Confirms Fine for Former Gangdong-gu Mayor Lee Jeong-hoon for Assisting Brother's 'No-Capital M&A'

Main Culprit's Younger Brother Sentenced to 10 Years Imprisonment and Confirmed Fine of 300 Million Won

Jeonghoon Lee, former mayor of Gangdong-gu.

[Asia Economy Reporter Choi Seok-jin, Legal Affairs Specialist] The guilty verdict of Lee Jeong-hoon, former mayor of Gangdong-gu (55), who was indicted for aiding his younger brother's capital-free mergers and acquisitions (M&A) crime by acting as the nominal representative of a company operated by his brother and giving false media interviews, has been confirmed.

The Supreme Court's First Division (Presiding Justice Kim Seon-su) on the 16th upheld the original ruling that sentenced Lee to a fine of 10 million won for aiding violations of the Capital Markets Act.

The court explained the reason for dismissing the appeal, stating, "Upon reviewing the grounds of the original judgment in light of relevant laws and properly admitted evidence, there is no error such as violating the principles of logic and experience, exceeding the limits of free evaluation of evidence, misunderstanding of legal principles regarding the intent to aid and the principal offender's intent, credibility assessment of statements, or omission of judgment."

Lee was indicted for aiding a 'fraudulent unfair transaction' involving approximately 20 billion won in illicit gains, where his younger brother Lee (52) and others allegedly acquired shares of the KOSDAQ-listed gaming company 'YD Online' using the capital of a refrigerator sales company 'Cloud Magic' as a front between 2017 and 2018.

Investigations revealed that the actual purchase funds came from loan sharks.

Cloud Magic attracted attention from investors because Lee was the representative during his tenure as a Seoul city council member, but he was only the nominal representative at the time, with his brother Lee being the actual operator.

As a Seoul city council member, Lee was found to have aided the unfair transaction by giving false interviews related to Cloud Magic's financial capacity during his brother's illicit trading and embezzlement of YD Online shares.

The first trial court recognized Lee's aiding charges as guilty and sentenced him to a fine of 10 million won.

The court judged that Lee created the appearance of "an elected official acquiring a gaming company" through media interviews, which played a key role in attracting investors and boosting YD Online's stock price.

The court stated, "Although he claims he had no intention to assist fraudulent unfair acts, he cannot be exempt from responsibility as he forwarded press releases provided by his brother to reporters without verification." The appellate court shared the same judgment.

The Supreme Court also found no issues with the lower courts' rulings.

The Supreme Court acknowledged the guilty verdict for violating the Capital Markets Act, based on the premise that Lee's brother, the principal offender and actual acquirer of YD Online, planned the capital-free M&A, executed the stock transfer contract, directed involved parties, and controlled the entire process of funding and execution.

Additionally, the Supreme Court upheld the original ruling that found Lee guilty of aiding violations of the Capital Markets Act by conducting false interviews with an economic reporter from an online newspaper at his brother's request, significantly influencing YD Online's stock price and facilitating the capital-free acquisition.

On the same day, Lee's brother, who borrowed money from loan sharks to acquire YD Online and embezzled company funds, was sentenced to 10 years in prison and fined 300 million won.

Meanwhile, former and current executives who held YD Online shares through a private equity fund subsidiary of Mirae Asset Management and transferred shares to Lee were acquitted of Capital Markets Act violations, as the court found insufficient evidence of mutual understanding, tacit agreement, or functional control through essential contributions to prove conspiracy.

The court explained, "There is no error affecting the judgment such as failing to conduct necessary hearings, violating principles of logic and experience, exceeding the limits of free evaluation of evidence, misunderstanding legal principles regarding the establishment of Capital Markets Act violations due to fraudulent unfair transactions, intent and unlawful gain in violation of the Act on the Aggravated Punishment of Specific Economic Crimes (embezzlement), establishment of joint conspiracy, relationships between offenses under the Capital Markets Act, assessment of 'profits gained or losses avoided' under Article 443(1) of the former Capital Markets Act, identity of charges, or changes to the indictment."

A Supreme Court official stated, "Regarding the attempt of capital-free M&A, which was carried out by borrowing funds from loan sharks to pay the acquisition price and then transferring the acquired shares to the loan sharks, the ruling accepted the lower court's judgment that regarded the disclosures and reports made during the process as false disclosures and failure to fulfill reporting obligations, thereby recognizing the guilty verdict for violations of the Capital Markets Act due to fraudulent unfair transactions."

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