[La Deok-yeon Gate] Could La Deok-yeon Really Be the First Designer?... The Authorities' Intent Behind the Full CFD Account Investigation

Identifying Past Cases Similar to Ra Deok-yeon's Group
Detecting Stock Manipulation Techniques to Improve Market Surveillance System
Possibility of Extending Period up to 2016 When CFD Account Openings Became Active

The Financial Services Commission, Financial Supervisory Service, and Korea Exchange have jointly launched an intensive inspection of 3,400 Contracts for Difference (CFD) accounts to investigate potential links to unfair trading such as stock price manipulation. If suspicious trading activities are detected, immediate investigations and penalties will be enforced. This decision stems from the judgment that the case involving CEO Ra Deok-yeon of Hoan manipulating prices through CFD accounts may not be the first of its kind. The market believes that similar cases led by the stock manipulation group under the detained CEO Ra likely occurred in the past as well.

The Market Is Skeptical About Post-Factum Punishment Plans

On the 17th, a Financial Services Commission official stated, "We are reviewing accounts from recent years to assess the possibility of similar suspicious fraudulent trading activities. If such cases are found, we will investigate and refer them to the prosecution for punishment." A Korea Exchange official also said, "We will focus on examining suspicious trades similar to this incident." The inspection is planned to be completed within two months. Typically, the Korea Exchange takes about three and a half months to inspect abnormal trades, but this focused inspection will be expedited by establishing a new 'Special Inspection Team' within the Exchange's Market Surveillance Committee.

However, the market shows some skepticism toward these post-factum punishment measures. Even if suspicious trading activities are detected, proving and penalizing price manipulation charges is expected to face significant challenges. A financial investment industry insider commented, "Even if successful stock manipulation or other suspicious trades are found, the likelihood of follow-up actions is slim," adding, "This full-scale CFD account investigation should be seen primarily as a measure to prevent a second Ra Deok-yeon case."

In fact, financial authorities are showing a strong will to analyze trading patterns in this full-scale investigation to identify the tactics of manipulation groups and to systemically prevent such cases from occurring. The Financial Services Commission also stated that the purpose is to prevent a second Ra Deok-yeon incident. The Korea Exchange plans to use this investigation to reform market systems to prevent unfair trading. Son Byung-du, Chairman of the Korea Exchange, emphasized, "We will receive all CFD accounts from the authorities, analyze trading patterns, and improve the surveillance system to do our best to prevent such incidents from happening again."

The Korea Exchange’s market system improvement plan focuses on enhancing the ability to detect price manipulation by extending the detection period for price manipulation and improving the classification criteria for groups suspected of manipulation.

Currently, the Exchange mostly targets stocks that have surged sharply within a short period when selecting suspicious stocks for unfair trading allegations. Most abnormal trade detections focus on price increases and involvement rates (bids, quotes, executions) within 100 days. Stocks that have risen over a long period due to improved performance or classification as theme stocks, despite smaller short-term increases, have been inadequately detected. Going forward, the Exchange plans to expand the criteria for selecting suspicious stocks from short-term periods under 100 days to half-year or annual periods to promptly respond to new types of unfair trading involving long-term price manipulation and establish a market surveillance system accordingly.

The classification criteria for groups suspected of price manipulation will also be improved. For example, in the SG Securities-led stock price crash incident, suspects traded from different locations such as the registered owner’s home or workplace addresses to avoid IP tracking, causing the Exchange to misinterpret these as normal trades and making it difficult to confirm links between accounts. The Exchange plans to create new criteria to classify groups as the same suspect group if multiple accounts show similar trading patterns, such as overlapping traded stocks, in addition to regional proximity. A Korea Exchange official explained, "Once the account inspection is completed and CFD system improvements are made, simulations can be conducted to further improve the system."

Although the Financial Services Commission has announced plans to improve the CFD system, this alone cannot fundamentally prevent stock price manipulation. Therefore, calls to strengthen surveillance and punishment for stock manipulation crimes are growing louder. In particular, there is a strong demand to continuously develop new systems to detect suspicious trades. The Exchange expects to identify new manipulation tactics through this full-scale investigation and improve its systems based on the findings.

The Claim of a 10-Year Full-Scale CFD Account Investigation Is False

Meanwhile, the investigation targets accounts from January 2020 to the end of April 2023. The claim of a 10-year full-scale CFD account investigation is false. The Financial Services Commission and the Exchange stated, "There is currently no change in the investigation period." A Korea Exchange official said, "CFD accounts started in 2016, so a 10-year period does not apply," adding, "However, the mention of 10 years likely arose from considering retroactive application or the need to review a long period." Depending on the inspection results, there is a possibility of extending the investigation period back to 2016 when CFD account openings became widespread. However, Yoon Chang-hyun, a member of the People Power Party, said, "I do not believe Ra Deok-yeon was the original architect of this stock manipulation incident," and urged, "The full-scale investigation should root out past successful price manipulation groups as well."

※The SG Securities-led stock price crash incident has sounded an alarm for the capital market order. Readers’ reports will be a great help in uncovering the truth. We welcome any information regarding investment damage cases, suspicions of stock manipulation and asset concealment by Ra Deok-yeon’s side, and details about the large-scale sales by major shareholders of Dow Data and Seoul Gas. Please send your tips to jebo1@asiae.co.kr. Asia Economy will do its best to establish a transparent capital market order.

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