Supreme Court Confirms Not Guilty Verdict for Former Deutsche Securities Executive Accused of 'Option Shock' Involvement... 12 Years After Indictment

A Korean executive accused of participating in the 'Deutsche Option Shock' that caused hundreds of billions of won in damages to domestic stock investors in 2010 was acquitted after a 12-year trial.

According to the legal community on the 17th, the Supreme Court's 2nd Division (Presiding Justice Cheon Dae-yeop) finalized last month the original court ruling that acquitted former Korean Deutsche Securities executive Park, who was in charge of stock derivatives, and Deutsche Securities Corporation, who were indicted for violating the Capital Markets Act.

Supreme Court, Seocho-dong, Seoul.

The court explained the reason for dismissing the appeal, stating, "There is no error that affected the judgment, such as failing to conduct necessary hearings for the original court's decision, violating the rules of logic and experience beyond the limits of free evaluation of evidence, misunderstanding the law regarding conspiracy and functional act control in joint principal offenders, or omitting judgment."

On November 11, 2010, Deutsche sold a large volume of stocks worth 2.44 trillion won just 10 minutes before the market closed. On the day of the KOSPI 200 options expiration, the massive sell-off by Deutsche caused the KOSPI stock price to plummet, resulting in investors suffering huge losses amounting to 140 billion won.

However, Deutsche, which had previously purchased a large amount of 'put options' allowing them to sell KOSPI 200 at a predetermined price when the stock price fell, was investigated to have gained an unfair profit of 44.9 billion won.

The KOSPI 200 is an index representing the market capitalization of 200 representative Korean stocks, indicating how much their market capitalization has changed based on January 3, 1990.

The prosecution reported that Park conspired with three foreigners, including Derek Ong, a British executive in charge of arbitrage trading at Deutsche Bank's Hong Kong branch, who led the crime, and indicted them together in August 2011.

The three main foreign defendants never appeared before domestic judicial authorities, refusing investigation and trial. The prosecution issued an Interpol warrant for Derek Ong and the other foreign defendants, but they have not been extradited to date.

The trial for these defendants was stalled for over four years after indictment, and in January 2016, only Park and Deutsche Securities Corporation first received a first-instance judgment.

The first-instance court sentenced Park to five years in prison, finding that he conspired to manipulate the market by deliberately delaying prior reporting to the Korea Exchange. Under the vicarious liability provision, Korean Deutsche Securities Corporation was also fined 1.5 billion won.

However, the outcome was reversed in the second trial.

The second-instance court found the prosecution's evidence insufficient to recognize Park as a joint principal offender in market manipulation.

The court stated, "Based solely on the evidence submitted by the prosecution, it is difficult to conclude beyond a reasonable doubt that the defendant built a speculative position to profit from the decline of the KOSPI 200 index, was aware of and tolerated the manipulation of the KOSPI 200 index, and exercised functional act control through essential contribution to the crime as a co-conspirator with other defendants."

The Supreme Court's judgment was the same.

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