'COVID-19 Kit Stock Manipulation' PHC Group Real Owner Indicted... 93.1 Billion KRW Unlawful Profit

The Seoul Southern District Prosecutors' Office Joint Investigation Team for Financial and Securities Crimes (Chief Dan Seong-han) announced on the 1st that Lee Mo (54), the actual owner of the Philosys Group, which includes PHC, a medical device company listed on KOSDAQ, has been arrested and indicted.

[Image source=Yonhap News]

The number of suspects prosecuted for stock manipulation involving no-capital corporate raiding and the development of COVID-19 diagnostic kits has increased to seven. Previously, the prosecution had arrested and indicted six executives, including Choi In-hwan, CEO of PHC, and the vice president.

According to the prosecution, Lee is accused of controlling management rights by holding shares under a borrowed name without an official title within the group, acquiring PHC without capital, and leading stock manipulation, embezzlement, and breach of trust, gaining an unfair profit of 93.1 billion KRW. The Philosys Group consists of about 20 affiliates and related companies, including medical device and raw material production and distribution companies such as Philosys and PHC.

Lee faces charges under the Capital Markets Act for fraudulent transactions and false disclosures, under the Act on the Aggravated Punishment of Specific Economic Crimes for embezzlement and breach of trust, and for obstruction of official duties by deception.

From May to July 2019, Lee and others falsely disclosed funds procured from corporate raiders as their own capital to acquire PHC. From March to September of the following year, during the COVID-19 pandemic, they distributed and disclosed false press releases claiming "COVID-19 diagnostic kit patent, European certification," "KFDA manufacturing approval," and "FDA approval for specimen transport medium."

They forged doctors' signatures and submitted manipulated test result reports to the Ministry of Food and Drug Safety and the U.S. FDA to obtain approvals. It is estimated that they gained an unfair profit of 21.4 billion KRW by inflating the stock price. PHC's stock price rose 1079.4%, from a closing price of 775 KRW on March 18, 2020, to 9,140 KRW on September 9 of the same year.

Lee is also accused of causing damage by having PHC purchase shares of Philosys, an unlisted company he owned, at a high price from July to September 2019, immediately after acquiring PHC. PHC bought Philosys shares, which were priced at 2,000 KRW per share at the time, for more than double the price, between 4,300 and 5,000 KRW, resulting in a loss of 18.3 billion KRW.

In September 2020, CEO Choi and others transferred PHC's convertible bonds (CB) to Lee at a low price, causing an additional loss of 36 billion KRW to the company. Lee, CEO Choi, and others are also accused of embezzling and arbitrarily using about 17.5 billion KRW of funds from group affiliates from September 2020 to January of the following year. The total amount of embezzlement and breach of trust is estimated at 71.7 billion KRW.

PHC, which became a target of corporate raiding, had its trading suspended in March last year due to a refusal of audit opinion. The resulting damage to minority shareholders amounts to 185.2 billion KRW.

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