SG Stock Plunge Sparks 'Blame Game'... Is Ra Deok-yeon Preparing for Civil Lawsuit?

Prosecutor Ra Deok-yeon, Kim Ik-rae, and Victims Engage in Lawsuit Rally
Growing Suspicions Against Chairman Kim Ik-rae... Some Investors of Mr. Ra May Face Legal Responsibility

A blame game continues over the cause of the stock price crash triggered by the foreign securities firm Soci?t? G?n?rale (SG) Securities. Ra Deok-yeon, who is suspected of stock price manipulation involving Daesung Holdings, Seon-gwang, Seoul Gas, Samchully, Sebang, and Dow Data, claims that the sharp stock price drop was due to block deals by Kim Ik-rae, chairman of Daum Kiwoom Group, and Kim Young-min, chairman of Seoul Urban Gas. He also stated that he plans to file a lawsuit seeking damages against Chairman Kim Ik-rae. Kiwoom Securities plans to file a complaint against Ra today (the 2nd) for spreading false information and defamation. Victims of the stock price crash have filed complaints against Ra for fraud and other charges.

On the 24th of last month, Daesung Holdings, Seon-gwang, Seoul Gas, Samchully, Sebang, Daol Investment Securities, Harim Holdings, and Dow Data all simultaneously hit their lower price limits. SG Securities ranked among the top selling brokers, attracting public attention. As news spread that the Financial Services Commission and prosecutors were investigating Ra regarding the stock price increases of these stocks, the dominant analysis is that the stock price plummeted during the process of recovering investment funds after stock price manipulation.

However, in interviews with multiple media outlets, Ra claims that he is actually a victim and that Chairman Kim Ik-rae intentionally caused the stock price to fall. Coincidentally, just before the stock price crash, Chairman Kim Ik-rae and Chairman Kim Young-min sold large amounts of shares through block deals, raising suspicions that they might have known about the stock price manipulation in advance and disposed of their shares accordingly.

Ra Deok-yeon: "I am not responsible for the stock price crash"... Preparing for civil litigation?

The financial investment industry expects that the truth of Ra’s claims will soon be determined through investigations. A Korea Exchange official said, "Collusive trading itself can be considered part of stock price manipulation." By matching the transaction records of clients from the advisory firm operated by Ra, it is expected that whether collusive trading occurred will become clear.

H Investment Consulting CEO Ra Deok-yeon, who was booked by the prosecution in connection with the SG Securities crash incident, is being interviewed by Yonhap News TV on the 1st. Photo by Yonhap News TV

Regarding Ra’s refusal to accept responsibility for the stock price crash, there is an interpretation that he may be preparing for civil lawsuits that will follow after the prosecution’s investigation and trial. Current law imposes fines up to five times the amount of unfair gains from stock price manipulation. However, economic sanctions such as confiscation and recovery of unfair profits are insufficient. In civil lawsuits filed by victims, the responsibility for the stock price crash is likely to be a major issue. A legal expert explained, "When victims look for targets to sue, they also consider whether the defendant has the ability to pay compensation," adding, "By claiming that he also suffered large losses, he may be subtly indicating that he lacks the capacity to compensate."

Did Chairman Kim Ik-rae really not notice the abnormal signs?

On the 20th, Chairman Kim Ik-rae sold 1.4 million shares (3.65%) of Dow Data through after-hours trading at 43,245 won per share. His shareholding decreased from 26.66% to 23.01%. He secured 60.5 billion won from the sale. The buying broker was Morgan Stanley. The buyer was confirmed to be a foreign entity, but it cannot be ruled out that the transaction was conducted through a CFD account.

Hwang Hyun-soon, president of Kiwoom Securities, a Daum Kiwoom Group affiliate, said on the 28th of last month, "Coincidentally, he (Chairman Kim Ik-rae) just happened to sell at that time," adding, "Representative Ra does not know." A senior official of Daum Kiwoom Group, who has long assisted Chairman Kim, also dismissed suspicions of his involvement in stock price manipulation.

However, there is growing weight to the opinion that even if Chairman Kim had no connection with Ra, he would have noticed abnormal signs. Above all, during the sluggish domestic stock market in the second half of last year, Dow Data’s stock price more than doubled. It rose from 10,200 won at the end of June last year to 32,750 won at the end of December last year. Notably, Chairman Kim purchased an additional 34,885 shares of Dow Data between June and September last year. The stock price, which was in the 13,000 won range, continued to rise thereafter.

Hwang Hyun-soon, CEO of Kiwoom Securities, is attending the 'Financial Supervisory Service - Major Domestic Securities Firms CEO Issues Meeting' held at the Korea Financial Investment Association in Yeouido, Seoul, on the 28th. Photo by Yoon Dong-joo doso7@

The upward trend in Dow Data’s stock price continued this year, reaching 55,000 won in early February. During the process of investigating the cause of the price increase, it is likely that the existence of investors or forces accumulating shares was confirmed to some extent. According to Dow Data’s business report, at the end of last year, the number of minority shareholders holding less than 1% was 8,935, a 40.1% decrease compared to the end of 2021. The shareholding ratio of minority shareholders also dropped from 29.7% to 21.78%. During the same period, the major shareholder’s stake changed little, from 67.05% to 67.07%. This indicates that the number of shareholders holding more than 1% increased while minority shareholders decreased.

While preparing for the regular shareholders’ meeting, it appears that they checked the shareholder registry and noticed differences from previous years. An official from a listed company said, "It is inevitable to pay attention to shareholders holding more than 1% in the shareholder registry," adding, "At least at the practical level, they likely recognized differences from the past."

Are those who invested with Ra really victims?

Some investors claim to be victims and have taken legal action. Law firm Lee Kang submitted a complaint by mail to the Seoul Southern District Prosecutors’ Office on behalf of about ten victims of the crash, requesting an investigation into the stock price manipulation group for fraud, tax evasion under the Act on the Aggravated Punishment of Specific Crimes, violations of the Capital Markets Act, and the Act on the Regulation of Concealment of Criminal Proceeds. The victims plan to file civil lawsuits while monitoring the progress of the investigation. Law firm Daegeon also plans to soon represent about 100 victims in filing complaints against the stock price manipulation group for fraud and breach of trust.

The prosecutors conducting the investigation are expected to initially question investors who entrusted money to Ra as witnesses. Some investors have filed complaints claiming they were deceived by Ra. The legal community believes it is unlikely that investors entrusted large sums of money without knowing anything. However, investors may be divided into those who received relatively more information and those who received less. Among the approximately 1,000 investors Ra mentioned, some may find it difficult to avoid legal responsibility.

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