Six Stock Tipsters Indicted... Buying in Advance and Recommending Stocks on SNS and YouTube (Comprehensive)

Prosecutors' Efforts to Recover Criminal Proceeds...Preliminary Seizure Measures
Use of 'Seonhaeng Maemae' Method: Buy First, Recommend Later
Over 3,000 Complaints Filed...Investors Should Exercise Caution

The prosecution has indicted six individuals, including operators of paid and free SNS stock leading rooms and YouTubers, who obtained illegal profits through stock leading. The prosecution stated that it will strive to recover the criminal proceeds through seizure preservation measures. Since related complaints exceed 3,000 cases annually, investors need to be cautious to avoid damages from stock leading.

[Image source=Yonhap News]

At around 10:30 a.m. on the 22nd, Chae Hee-man, head prosecutor of the Financial Investigation Division 1 at the Seoul Southern District Prosecutors' Office in Yangcheon-gu, Seoul, announced that from December last year until this day, two illegal stock leading operators, Yang (30) and Kim (28), were arrested and indicted for violating the Capital Markets Act, and four others including Song (37) were indicted without detention. Song, who promised principal guarantees to attract investors, was also charged with violating the Act on the Regulation of Conducting Fund-Raising Business Without Permission.

The prosecution obtained seizure preservation orders for the illegal profits of five of the indicted individuals except Song, and also requested a seizure preservation order for Song simultaneously with the indictment. Prosecutor Chae stated, "We will do our best to recover the criminal proceeds so that they can never commit crimes again."

The prosecution received the cases of the six indicted individuals on a fast track from the Financial Services Commission and the Financial Supervisory Service, who had detected suspicious pre-trading cases, and conducted investigations. It is reported that the financial authorities uncovered abnormal transactions through various channels including tips and undercover inspections.

Leading Operators Buy Stocks in Advance, Recommend to Members, Then Sell for Price Gains

The mechanism of obtaining unfair profits through 'illegal stock leading'/Data=Seoul Southern District Prosecutors' Office

According to the prosecution, these individuals operated stock leading rooms and YouTube stock broadcasts, using investors who were members of the leading rooms or viewers of the stock broadcasts as so-called 'volume receivers' (victims of pre-trading crimes) or as a force to manipulate stock prices for illicit gains. Pre-trading refers to the act of a person or a stock manipulation group buying specific stocks in advance, recommending investors to actively buy them to drive up the price, and then selling to obtain illegal profits.

In this process, some operated unauthorized investment advisory businesses and conducted unauthorized fund-raising activities. According to the Capital Markets Act, investment advisory service providers or similar investment advisory service providers are prohibited from receiving or depositing money, securities, or other assets from investors. To operate investment advisory or similar investment advisory businesses, registration with the Financial Services Commission and notification to the Financial Supervisory Service are required, respectively.

Yang, Ahn (30), and Shin (28) are accused of recommending 28 stocks in free KakaoTalk stock leading rooms from March to October last year and earning about 364 million KRW in illegal profits through pre-trading. They operated 10 to 20 leading rooms, each with 60 to 200 users. Yang, who appeared on economic TV broadcasts, achieved the highest return rate in a practical stock investment competition hosted by a domestic securities firm using this method, but his award was revoked after the crime was discovered.

Kim (28), an employee of a similar investment advisory company, is accused of leading investors to buy and hold stocks of Company A from December 2020 to May of the following year by claiming that a manipulation group was involved in the transfer of the largest shareholder's stake and management rights of Company A to raise the stock price, thereby obtaining an unspecified amount of illegal profits. He is also accused of receiving about 200 million KRW in recruitment performance bonuses. About 300 paid leading room members who traded stocks based on Kim's recommendations suffered losses of 15 billion KRW.

By purchasing and holding 25-30% of the freely tradable shares of Company A (locking volume) through Kim's leading, it became possible to manipulate the stock price with a small amount of money. The prosecution stated that it is continuing to investigate the stock manipulation group that requested 'volume locking' from Kim and used Kim's actions to raise stock prices and obtain illegal profits.

Song is accused of operating a paid KakaoTalk leading room without registration from November 2020 to April of the following year, and recommending 63 stocks through stock specialty broadcasts until August last year while engaging in pre-trading. From January 2018 to July last year, Song is also accused of attracting about 13.3 billion KRW from investors by promising principal guarantees without authorization and investing in stocks. Song earned about 122 million KRW in illegal profits through this.

Kim (54), who has about 550,000 subscribers, is accused of recommending five stocks on his YouTube stock broadcast from June 2021 to June last year and earning about 5.8 billion KRW in illegal profits through pre-trading. While strictly scrutinizing other employees' conflict-of-interest stock trading, Kim used Contracts for Difference (CFD) accounts, which make it easier to conceal trading facts, to conduct pre-trading. Kim is known as a so-called 'Super Gaemi' (Super Individual Investor), operating a YouTube broadcast ranked 13th in subscribers in the economic field and 4th in stock-related YouTube broadcasts.

Prosecutor Chae said, "It is a typical fraudulent unfair trade for a leading room operator to hide their pre-purchase and then tell members to buy stocks at high prices before selling the stocks they had purchased." He added, "Leading room members can become victims who receive the operator's volume or potentially become part of the manipulation group."

Over 3,000 Cases of Illegal Stock Leading Damage... Investors Should Be Cautious

Damage related to illegal stock leading is increasing. Complaints related to illegal stock leading received by the Financial Supervisory Service exceeded 3,000 cases annually since 2021. The numbers were 905 in 2018, 1,744 in 2020, 3,442 in 2021, and 3,070 last year. The prosecution said that ordinary retail investors frequently suffer large losses after being deceived by false and exaggerated advertisements such as 'loss recovery,' 'short-term high returns guarantee,' and 'refund guarantee' and subscribing to the services.

[Image source=Yonhap News]

The prosecution emphasized that 'free stock leading' is likely a bait to induce paid membership, as one of the income sources of stock leading rooms and stock broadcasts is paid membership fees. They also warned that trading according to free recommendations may unknowingly make investors victims of pre-trading crimes. Prosecutor Chae said, "When leading operators receive complaints, they demand credit trading or more unreasonable things, promising to recover losses in a short period." He added, "Ultimately, losses spread to family, relatives, and acquaintances." He urged, "Investors should abandon the idea that they can profit through stock leading rooms."

He also said that if a paid leading operator checks the investable amount or guarantees profits on specific stocks while demanding profit sharing, there is a high possibility of fraud. Moreover, since paid leading companies often do not respond to cancellation or refund requests, careful subscription is necessary. He also noted that the career, return rates, user reviews, and bulletin board comments of stock experts may also be false or exaggerated.

Furthermore, users of stock leading rooms need to be especially cautious as they may become involved in crimes. Providing undisclosed internal company information or information about stock manipulation groups to general investors during stock leading can result in imprisonment for more than one year. Prosecutor Chae explained, "If investors knowingly invest while aware that stock leading is involved in stock manipulation, they can become part of the manipulation group or accomplices." He added, "Once they gain profits, they may become addicted and suffer difficulties escaping."

Prosecutor Chae said, "Stock leading-related crimes are often conducted secretly using Telegram, WhatsApp, etc., and criminal proceeds are concealed through nominee accounts." He urged, "We ask for active reporting and cooperation in investigations from users."

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