[La Deok-yeon Gate] Will Additional Charges Be Added Against the 'Stock Price Manipulation Gang'... Fraud and Forfeiture of Corrupt Assets Act, etc.

Radyeokyeon Arrested on Charges of Violating Personal Information Protection Act and Act on Concealment of Criminal Proceeds
Possibility of Tax Evasion, Fraud under Special Economic Crimes Act, and Forfeiture of Corrupt Assets

The prosecution is additionally investigating tax evasion charges against CEO Ra Deok-yeon of Hoan, who led the ‘SG Securities-induced stock price crash incident,’ in addition to the existing allegations. There is also a possibility that charges such as fraud under the Act on the Aggravated Punishment of Specific Economic Crimes may be added.

Regarding the crash caused by Soci?t? G?n?rale (SG) Securities, Ra Deok-yeon, the CEO suspected of leading stock price manipulation, is attending the pre-arrest suspect interrogation (warrant hearing) held at the Seoul Southern District Court on the morning of the 11th. Photo by Yonhap News

On the 19th, a prosecution official stated, "We will look into whether there are additional charges to apply to CEO Ra and others." Currently, CEO Ra, his closest aide Mr. Byeon, and former professional golfer Mr. Ahn are detained on charges of violating the Capital Markets Act through stock price manipulation using ‘matched trading’ methods (market manipulation, unregistered investment discretionary business) and concealing criminal proceeds. It is known that the prosecution has been verifying whether tax evasion occurred since their detention.

The prosecution believes that half of the 264.2 billion KRW illicit gains from the stock price manipulation by Ra and his group?132.1 billion KRW?was received through so-called ‘card kkang’ by using golf courses, restaurants, hospitals, etc., where the stock manipulators were registered as CEOs or inside directors. ‘Card kkang’ is an illegal act of generating false card sales and receiving cash from card merchants after deducting fees. Since receiving fees from a single corporation would incur large taxes, it is suspected that they divided the receipts among multiple corporations to lower the taxable base and evade taxes.

If it is proven that Ra Deok-yeon and his group ‘intended to deceive investors,’ fraud charges under the Act on the Aggravated Punishment of Specific Economic Crimes may be applied. Sixty-six investors filed a complaint with the Seoul Southern District Prosecutors’ Office accusing CEO Ra and others of fraud under the Act, calling it a ‘Ponzi scheme disguised as value investing.’ According to the complaint, CEO Ra and others told investors that they would generate profits by investing in undervalued blue-chip stocks, but in reality, they artificially manipulated stock prices. During this process, they did not explain the possibility of incurring margin debt and opened Contract for Difference (CFD) accounts without the consent of some investors.

If fraud charges are applied to Ra Deok-yeon and others, additional measures under the Act on the Confiscation and Recovery of Proceeds from Corruption and Other Crimes may be considered to restore investors’ losses. According to this law, confiscation and recovery of criminal proceeds obtained through fraud, extortion, etc., are possible. If this charge is added, confiscated and recovered criminal assets can be returned to the victims. Currently, the Capital Markets Act applied to Ra Deok-yeon and his group does not include provisions related to the disposition of criminal proceeds obtained through fraud.

Under the Capital Markets Act, market manipulation is punishable by imprisonment with labor for more than one year, and if the profit gained is 500 million KRW or more, imprisonment with labor for at least three years is imposed. Fines range from three to five times the profit or avoided loss, and if it is difficult to calculate, the upper limit is set at 500 million KRW. Unregistered investment discretionary business under the Capital Markets Act is punishable by imprisonment for up to three years or a fine of up to 100 million KRW, and violation of the Act on Concealment of Criminal Proceeds is punishable by imprisonment for up to five years or a fine of up to 30 million KRW.

Meanwhile, there is also a view that charges related to organized crime such as criminal organization should be applied to Ra Deok-yeon and his group. The crime of criminal organization applies when a group or collective is organized or joined to commit crimes punishable by death, life imprisonment, or imprisonment for four years or more, and members act as part of the organization. Considerations include whether roles were divided and actions were coordinated systematically. However, a prosecution official said, "The requirements are strict, so it may not be easy to apply."

※ The SG Securities-induced stock price crash incident has sounded an alarm for the order of the capital market. Readers’ tips will be a great help in uncovering the truth. We welcome any information regarding investment damage cases, suspicions of stock price manipulation and asset concealment by Ra Deok-yeon’s side, the background of large-scale sales by major shareholders of Dow Data and Seoul Gas, or any other related matters (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.