"'5 Stocks Hit Lower Limit' Cafe Operator Claims 'Wash Trading? It's a Transaction Among Shareholders'"

Mr. Kang "Natural Cross-Trading Among Shareholders"
Expert "Completely Ruling Out Suspicion Is Difficult"

Kang Ki-hyeok, head of the Barun Investment Research Institute and a stock investor involved in the ‘Naver Cafe Recommended Stocks Price Crash Incident,’ claimed that the allegations of ‘collusive trading’ surrounding him were "merely a free trading process among shareholders." However, experts point out that such advisory activities are unlikely to escape suspicion of collusive trading.

On the 14th, five stocks including Dongil Industry, Dongil Metal, Manho Steel, Daehan Textile, and Banglim all hit the lower limit price in a batch.

On the 19th, Kang stated in a phone interview with Asia Economy that the collusive trading allegations were "a natural cross-trading among shareholders, but the situation is being framed as collusive trading." He explained that investors participating in shareholder activism sometimes sell some shares due to individual circumstances such as capital gains tax issues and then buy more shares when funds become available, resulting in a natural outcome. He also said, "I do not know whether cross-trading actually occurred," and added, "It is absurd to call mutually crossed trades under unavoidable circumstances collusive trading."

On the 14th, when five stocks?Dongil Industry, Dongil Metal, Manho Steel, Daehan Textile, and Banglim?hit the lower price limit en masse in the stock market, suspicions arose that all these stocks were recommended stocks in the stock investment Naver Cafe operated by Kang, making him the focal point behind the incident. The Seoul Southern District Prosecutors' Office conducted a search and seizure at Kang’s residence on the 15th and at his office on the 16th. The financial authorities also suspended trading of the five stocks on the 15th and requested disclosure inquiries from each company regarding suspicions of unfair trading.

Kang argued, "Coordinating investments by providing information to investors without adversely affecting supply and demand is the core of shareholder activism." He meant that he proposed reasonable responses to investors aiming to maintain their shares while pursuing ‘shareholder activism.’ Kang said, "There are quite a few people who want advice, but I cannot give the same advice to everyone," adding, "Since market supply and demand information naturally comes to me, I can tell some people to buy in the morning and sell in the afternoon, and tell others to do the opposite."

Regarding the role of the Naver stock cafe, he defended it as "nothing more than a ‘diary’ for sharing investment information." Kang stated, "(The Naver Cafe) is a space for posting in-depth analysis articles or introducing companies that might yield results if invested in together to increase voting rights and realize qualitative changes in companies," and added, "I did not recommend stocks for commissions or money." He said, "When stock prices rose according to the information I provided in the cafe, I gained investors’ trust and was entrusted with stock voting rights."

However, there is a view that Kang’s stock recommendations and trading advice are difficult to completely clear suspicions of collusive trading. Yang Tae-jung, chief lawyer at the law firm Gwangya, said, "If advice on buying and selling was received and trades were made in the open market beforehand, it could cause misunderstandings among other investors."

Kang said, "I invested even on credit to secure shares." He explained, "For shareholder activism to succeed, the shares of minority shareholders must increase to a level that overwhelms the major shareholders," adding, "Since it was close to the point of taking control of management rights, core members of the shareholder movement who were confident of gaining great profits from achieving the final goal invested all available funds."

Regarding Kang’s claims, there are criticisms that shareholder activism through leverage is not common. Lawyer Shim Hye-seop said, "If leverage is used, one can suffer significant losses when stock price volatility increases," and added, "Shareholder activism involves lawsuits and using voting rights to engage in disputes, so stock price volatility tends to increase during this process." He continued, "Nevertheless, looking at the stock price graphs of the five stocks that hit the lower price limit this time, there is almost no price fluctuation, which is why the financial authorities suspect collusive trading or price manipulation orders."

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