Manipulating Trade Performance to Boost Stock Prices? Korea Customs Service Announces Special Crackdown and Strict Enforcement

The government is taking strong measures against acts that disrupt the capital market, such as artificially inflating stock prices by manipulating export and import performance data.

On August 12, the Korea Customs Service announced that starting this month, it will conduct a special crackdown on activities that manipulate export and import performance in the capital market for the purpose of unfair gains.

This special crackdown is being implemented to block the negative impact that trade and economic crimes, such as export and import performance manipulation, have not only on the capital market but also on the national economy.

A company's export-import performance manipulation-related crime schematic. Provided by the Korea Customs Service

Business performance, as disclosed externally, serves as an indicator of a company's external competitiveness and profitability. In particular, a company's trade activities must be legitimate in order to maintain transparency and trust in the capital market.

If a company's trade activities are fabricated or artificially manipulated, the external evaluation of the company's value can be distorted, leading investors to make misguided decisions.

Additionally, if a company's growth potential is misjudged, public and private funds such as government subsidies and trade finance, which should be allocated to companies in need, may be unjustly provided to companies that do not meet the qualifications. This can result in the leakage of national finances and a decline in national competitiveness.

However, in recent years, the scale of trade and economic crimes has been increasing, with 110 cases worth 289.4 billion won in 2021, 80 cases worth 108.7 billion won in 2022, 67 cases worth 476.6 billion won in 2023, and 100 cases worth 906.2 billion won last year.

Among the types of trade and economic crimes detected, a representative case of capital market disruption through export and import performance manipulation is the so-called "Ping-Ping Trade" case involving Company A, which was recently uncovered by the Busan Main Customs Office of the Korea Customs Service. "Ping-Ping Trade" refers to the act of repeatedly conducting formal export and import transactions without any actual trade, creating the false appearance of real transactions.

For example, Company A exported and imported non-marketable eco-friendly battery components to and from Hong Kong six times over three years, manipulating prices to make it appear as if sales of around 7 billion won had occurred. The company exported goods and then imported them through a shell company under an acquaintance's name, subsequently using the goods for re-export. The funds paid as import payments were then recovered, creating the appearance of having received export proceeds.

By fabricating export (sales) performance in this way, Company A provided sales data to evaluation agencies and attempted to list on KOSDAQ through the technology special listing system by falsely claiming to have successfully commercialized and exported eco-friendly battery components. The technology special listing system is a scheme that allows companies to list on the stock market and attract investment based on the potential value of their proprietary technology.

In particular, the company participated in a government-supported project related to eco-friendly batteries, receiving 1 billion won in government subsidies (300 million won already received and 700 million won scheduled for receipt), and also fraudulently obtained 1.1 billion won in trade finance loans from a commercial bank.

This special crackdown aims to strictly investigate and punish acts such as manipulating export and import performance or misappropriating private and public funds, as seen in the case of Company A.

To this end, the Korea Customs Service has established the "Trade Abuse Capital Market Disruption Response Task Force," which will be responsible for analyzing information related to export, import, and foreign exchange transactions. The agency plans to identify companies that manipulate export and import performance or falsely disclose sales in the capital market for unfair gains, and to closely examine whether laws have been violated.

The Korea Customs Service explained that investigations will only be launched in cases where clear suspicion is confirmed through information analysis. In cases where the criminal nature is unclear, internal monitoring will be strengthened to swiftly close cases. This is intended to ensure that legitimate export and import companies conducting lawful trade are not restricted by the special crackdown.

Lee Myunggu, Commissioner of the Korea Customs Service, emphasized, "Acts that disrupt the capital market by manipulating export and import performance are crimes that directly harm honest investors. Moreover, the seriousness is heightened by the fact that such acts can undermine the domestic capital market’s credibility both at home and abroad."

He added, "The Korea Customs Service will rigorously crack down on trade crimes committed for unfair gains in the capital market to prevent harm to honest investors and to help foster a sound capital market ecosystem."

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