'5 Stocks Hitting Lower Limits' Similar to SG Incident... Stock Cafe Operator Blames Securities Firms

Operator Kang Mo says "Due to securities firms' small-cap loan restrictions"
'Second SG Incident'... Prosecution conducts Kang's withdrawal and seizure actions

The operator of an internet investment cafe involved in the domestic stock market '5 stocks hitting the lower limit' incident shifted the responsibility to securities firms. Currently, the cafe has about 6,000 members registered.

On the 16th, Kang Mo, the operator of a Naver cafe related to stock investment, claimed through a post on the cafe the previous day that "the decline on the 14th was triggered by securities firms indiscriminately restricting loans on small-cap stocks and not extending maturities after the 'SG incident'." This statement is interpreted as an attempt to shift the suspicion directed at him to the securities firms, as five stocks?Dongil Industry, Dongil Metal, Manho Steel, Daehan Textile, and Banglim?all hit the lower limit simultaneously.

Kang said, "The volume from those who wanted to hold (stocks) but had no choice but to sell worsened the supply-demand situation," adding, "I tried hard to resolve this, but I suffered a serious injury, which created a handicap that prevented me from making the usual efforts to secure new friendly shares."

However, industry insiders say Kang’s claim resembles the 'SG Securities-induced stock price drop incident' in April, when eight stocks hit the lower limit. Although the exact cause of the simultaneous plunge of the five stocks is unclear, like the April SG Securities incident, the stocks had been rising continuously for about three years before suddenly crashing.

The Seoul Southern District Prosecutors’ Office is also expected to intensify its investigation. On the 14th, prosecutors imposed a travel ban on Kang and conducted a search of his residence the previous day. A prosecutor stated, "Since there is a stock price plunge involved, we are diligently reviewing the case."

However, some analyses suggest the cause differs from the 'SG incident,' which was triggered by CFD (Contract for Difference) forced liquidation, as CFDs were not involved this time. Also, unlike the SG incident where the large-scale selling was concentrated through 'SG Securities,' the stocks hitting the lower limit this time were sold through various domestic securities firms.

Kang also emphasized that members invested freely. He said, "Dongil Industry and Dongil Metal have had many reports posted since 2011, and Daehan Textile since 2013, but currently less than 5% of cafe members hold these three stocks," adding, "Manho Steel and Banglim were never recommended in this cafe, and less than 3% of members hold these two stocks."

He said, "I only introduced stocks to the cafe that I was confident would not cause losses," and "Members freely chose and traded stocks they liked among the companies introduced according to their own capacity." He even claimed that his family, including his two daughters, ended up with empty accounts due to forced liquidation.

Stock price graph of Dongil Industry, one of the '5 stocks' that showed a sharp limit down on the 14th / Photo by Naver Securities capture

As suspicions about the background of the lower limit hit surfaced, financial authorities also launched an investigation. The Financial Supervisory Service (FSS) suspended trading of the five stocks that simultaneously hit the lower limit starting the previous day and requested disclosure inquiries regarding unfair trading suspicions from these companies by the afternoon of the same day. The FSS plans to use this as a basis to inspect for unfair trading.

Kang, at the center of the incident, has been reclusive due to his injury. Attempts to contact him for his opinion were unsuccessful. Kang posted a photo verifying his injury in a post titled "Absurd rumors are rampant," which was set to be visible only to registered members. He claimed, "Accounts of those devoted to shareholder activism faced issues with loan maturity extensions not being granted, and while rushing around to resolve this, I was injured due to overwork."

Meanwhile, Kang was previously convicted in 2021 for manipulating the prices of four listed companies.

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