"Financial Authorities Uncover Investment Fraud with Hundreds of Billions Profit from US Nasdaq Listing"

Financial Services Commission Approves Fine at Regular Meeting on 21st
Restores Victims' Assets Through Cooperation with US SEC

"You can earn tens to hundreds of times profit upon Nasdaq listing."

The management of a U.S. unlisted company was caught by financial authorities for soliciting investment funds in non-existent unlisted stocks under the pretext of planning to list on the U.S. Nasdaq without submitting a securities registration statement. The authorities are working with overseas financial regulators through international cooperation to help victims of investment fraud recover their assets.

On the 21st, the Financial Services Commission (FSC) announced at its 3rd regular meeting that it decided to impose a total fine of 1.23 trillion KRW on the management of Company A, a U.S. unlisted company. Regarding related fraudulent trading allegations, the FSC also resolved at the 3rd regular meeting of the Securities and Futures Commission to refer the case to the prosecution.

According to the FSC and the Financial Supervisory Service (FSS), the chairman and executives of Company A, accused of fraudulent trading, deceived investors by claiming that Company A had received over 70 billion USD worth of real estate as in-kind contributions from local governments in China and planned to operate real estate businesses such as hotels and shopping malls, and that the Nasdaq listing was imminent, promising tens to hundreds of times returns upon listing.

To recruit investors more systematically, the suspects established an unlicensed investment brokerage firm in Korea under a name similar enough to be mistaken for a licensed company called ○○○○BANK Securities. They also rented auditoriums or offices in Seoul to hold investment briefings targeting prospective investors introduced by recruiters or existing shareholders.

Through this, the suspects raised about 30 billion KRW from approximately 2,700 domestic investors and transferred the funds to accounts opened overseas, which they then misappropriated. All of them are Korean nationals.

The main characteristics of the fraudulent trading activities uncovered by the FSC are fourfold. First, they directly established an unlicensed investment brokerage firm in Korea and used a multi-level recruitment method to solicit investors. Second, they disseminated false information that was difficult to verify. Third, they lured investors with the false bait of a Nasdaq listing. Lastly, despite the obligation to disclose securities registration statements and other disclosures, they failed to do so.

The financial authorities, in cooperation with the U.S. Securities and Exchange Commission (SEC), secured transaction details of the suspects’ U.S. bank accounts to detect fraudulent trading. They have also been negotiating ways to return the suspects’ assets (deposits, real estate, etc.) frozen and recovered by the SEC through U.S. court rulings to Korean investors to help recover domestic investors’ losses. The SEC has expressed willingness to cooperate in returning the recovered assets to Korea.

The financial authorities stated, "The assets recovered so far by the SEC through rulings to return unjust profits (3.5 million USD in deposits) and additional assets expected to be recovered depending on ongoing trial outcomes will be returned to Korean investors according to relevant procedures. We will continue to actively coordinate this process."

Meanwhile, the financial authorities emphasized the need to be cautious about investment inducements from unlicensed investment brokerage firms. They also urged special care in understanding corporate information as investing in unlisted stocks involves high risks. They added that investors should verify whether securities registration statements have been disclosed when investing in unlisted stocks.

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