[La Deokyeon Gate] Controversy Surrounding Kim Ik-rae Continues... Dispute Escalates to Police Investigation

Radukyeon, who earned a living from workshops, arrested; chairman resigned but controversy continues
Police: "Thorough investigation of defamation"
Prosecutors also: "Considering summons based on investigation results"

The responsibility for the ‘SG Securities-triggered stock price crash’ is causing a mudslinging battle between CEO Ra Deok-yeon of Hoan and former Dow Kiwoom Chairman Kim Ik-rae. Former Chairman Kim filed a defamation complaint against CEO Ra with the police, who have announced their intention to thoroughly investigate the facts. Although no formal charges have been filed yet, the prosecution has also placed former Chairman Kim under investigation, drawing attention to where this legal dispute between the two will lead.

Former Chairman Kim has been at the center of controversy since the early stages of this incident.

The controversy began with a defamation case involving CEO Ra. Earlier, former Chairman Kim and Kiwoom Securities filed a complaint with the Seoul Metropolitan Police Agency against Ra Deok-yeon, stating, "Ra made malicious false statements in a media interview on April 28, claiming that the recent stock price crash triggered by SG Securities was caused by us." Former Chairman Kim further stated, "Ra admitted in a broadcast interview that he operates an unregistered investment advisory firm and referred to me as the mastermind behind this incident, saying ‘the person who profited from this incident is the culprit.’"

Regarding former Chairman Kim’s complaint, Woo Jong-su, head of the National Investigation Headquarters of the National Police Agency, announced on the 15th, "The case has been assigned to the Yeongdeungpo Police Station in Seoul, and we will promptly investigate the complainant and proceed with the investigation."

The responsibility dispute over the ‘stock price crash’ escalated when CEO Ra claimed through the media that former Chairman Kim was behind the ‘stock price crash incident.’ In a phone interview with Asia Economy on the 2nd, when asked, "You are being pointed out as the core of the stock price crash incident; what is your position?" Ra responded, "Am I the core?" and added, "If an investigation into former Chairman Kim reveals any charges related to the stock price crash, I will file civil and criminal lawsuits."

According to the Financial Supervisory Service’s electronic disclosure system, former Chairman Kim sold 1.4 million shares (60.543 billion KRW) of Dow Data through a block deal on the 20th of last month, just before the stock price crash. A block deal is a transaction where a major shareholder finds a buyer and transfers shares after the market closes. Former Chairman Kim’s side claimed that the shares were sold to raise funds for gift tax payments. In a phone interview with Asia Economy, CEO Ra said, "If former Chairman Kim received money from the block deal transaction, the source of funds must be investigated. If he did not receive money, then it would be a case of a major shareholder short selling, and in that case, it must be determined whether there was margin at that time." This raised suspicions of illegal naked short selling under the Capital Markets Act against former Chairman Kim.

In response, former Chairman Kim and Kiwoom Securities stated, "The stock sale was conducted legally," and disclosed the block deal transaction details. Former Chairman Kim said the block deal was completed with a foreign securities firm and proceeded after legal review and internal deliberation. However, just one day after releasing this statement, on the 4th, former Chairman Kim resigned from his positions as Dow Kiwoom Chairman and Kiwoom Securities Board Chairman. He also announced that the proceeds from the controversial Dow Data stock sale would be returned to society.

[Image source=Yonhap News]

Separate from the police complaint case, attention is also focused on whether the prosecution will formally indict former Chairman Kim. There are two major suspicions regarding former Chairman Kim in the SG Securities incident.

First, whether former Chairman Kim was aware in advance of CEO Ra’s group’s ‘stock price manipulation.’ If so, it is possible that former Chairman Kim anticipated the stock price crash and sold Dow Data shares before the media reported on Ra’s group’s activities. This speculation is based on the fact that some of the forced sell orders from the Contract for Difference (CFD) transactions, which triggered the incident, were executed through Kiwoom Securities. It is suspected that former Chairman Kim, using his position, accessed CFD transaction details by stock before the general investors and used this information for investment. If true, this would constitute a violation of the Capital Markets Act for insider trading.

[Image source=Yonhap News]

Second, the ‘price manipulation’ theory claimed by CEO Ra. Ra alleges, "Former Chairman Kim deliberately sold a large volume of shares to trigger the stock price crash in order to reduce gift and inheritance tax burdens." Since this is currently a unilateral claim by CEO Ra, it must be clarified through investigation. If the prosecution investigates former Chairman Kim and confirms these suspicions as true, the defamation complaint filed by former Chairman Kim against CEO Ra could backfire as a false accusation charge.

Although CEO Ra has been detained, the controversy surrounding former Chairman Kim is ongoing. About 50 investors have submitted petitions to the prosecution, the Financial Services Commission, and the Financial Supervisory Service, requesting investigations into former Chairman Kim and Kim Young-min, Chairman of Seoul Urban Gas, who liquidated 100,000 shares (45.7 billion KRW) of Seoul Gas just before the stock price crash. A prosecution official stated, "We will review summons investigations of the two after examining the police investigation results." It is known that former Chairman Kim has appointed a major law firm as his legal representative to prepare for the prosecution’s investigation.

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