'Another Stock Manipulation'... This Time, a Foreign-Listed Company CEO Engages in Market Price Manipulation

Financial authorities have detected allegations of stock price manipulation by the management of a foreign company listed in South Korea and reported the case to the prosecution.

The Securities and Futures Commission of the Financial Services Commission announced on the 23rd at the 18th regular meeting that it has reported the CEO (foreigner) of foreign company A, which is listed domestically, the head of its Korean liaison office, and other related personnel to the prosecution for allegations of manipulating the stock price of their own company. Company A operates substantial business through its subsidiaries in its home country but established an offshore holding company (SPC) in the Cayman Islands to list on the Korean stock market. From 2017 to 2018, despite the continuous decline in Company A’s stock price, they announced a paid-in capital increase, but as the stock price continued to fall afterward, they engaged in price manipulation to successfully facilitate the capital increase. The management reported to the prosecution by the Securities and Futures Commission includes Company A’s largest shareholder and CEO (foreigner) and the head of the Korean liaison office.

The head of the Korean liaison office, under the direction of Company A’s management, opened multiple securities accounts under his own name, as well as those of family and acquaintances, and handed them over to the stock price manipulation group to be used for price manipulation. Most of the manipulation orders were submitted by the stock price manipulation group from overseas, but some were directly submitted by Company A’s management. During the five months they engaged in price manipulation, Company A’s stock price rose by 26.8%.

They submitted approximately 34,000 orders during the price determination period to maintain the new share issuance price according to the targeted fundraising amount, and it was confirmed that they exceeded the targeted fundraising amount. Among them, the head of Company A’s Korean liaison office is also suspected of avoiding losses worth approximately 350 million KRW by disposing of shares in advance using information about the 2019 paid-in capital increase.

A financial authority official cautioned, "Large-scale paid-in capital increases are often perceived as negative information due to the risk of stock dilution, causing the stock price to temporarily plunge after the announcement. However, if the stock price surges sharply during the new share issuance price determination period without any particular reason, there is a possibility of unfair trading by manipulation groups, so investors should be cautious."

Large-scale paid-in capital increases are not necessarily negative news; if accompanied by new business ventures or other positive factors, the stock price may rise. Therefore, it is necessary to consider the type of capital increase, the volume of new shares issued, and the purpose of fundraising.

He added, "Before investing in foreign companies, investors should carefully verify the repayment ability of funds raised domestically through disclosures," and "Financial authorities will more closely monitor unfair trading involving foreign companies and related parties during the fundraising process and take strict action if detected."

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