"Stock Manipulation Leads to Ruin": First Joint Response Team Case Involves Ultra-Wealthy, Assets Frozen

Joint Response Team Uncovers 100 Billion Won Large-Scale Stock Manipulation
First Penalty Surcharge Imposed for Three Major Unfair Trading Practices... Twice the Amount of Illicit Gains

President Lee Jaemyung's strong warning about a "one-strike-out" policy against unfair practices in the capital market is becoming a reality. The joint response team, established to eradicate stock price manipulation, uncovered its "Case No. 1" involving a 100 billion won stock manipulation scheme orchestrated by wealthy individuals and financial experts. The authorities not only froze assets but also, for the first time, imposed a penalty equivalent to twice the amount of illicit gains on an individual investor who profited unfairly using information obtained through their position.

The joint response team for eradicating stock price manipulation, comprised of the Financial Services Commission, Financial Supervisory Service, and Korea Exchange, announced on the 23rd that it had detected a large-scale operation in which a major group secretly manipulated stock prices from early 2024 to the present, using substantial funds to secure illicit gains of about 40 billion won.

This is the first case handled by the joint response team under the new administration. The operation involved ultra-wealthy individuals who run general hospitals and large private academies, as well as former executives of well-known private equity funds and other financial experts. They systematically manipulated stock prices over an extended period by dispersing trades across dozens of accounts. The authorities confirmed that the group already realized capital gains of 23 billion won, and currently holds stocks worth about 100 billion won.

The Securities and Futures Commission under the Financial Services Commission implemented, for the first time, a payment suspension on dozens of accounts used in the stock manipulation, in accordance with the Capital Markets Act. The joint response team also conducted comprehensive raids on about ten locations, including the suspects' homes and offices, as a preemptive measure to recover all illicit gains acquired by the group.

An official from the financial authorities stated, "We will thoroughly recover the illegally acquired assets through penalty surcharges (up to twice the amount), so that the perception 'stock manipulation leads to ruin' takes root in the market." The official added, "We will actively utilize new administrative sanctions introduced in the Capital Markets Act, such as restrictions on trading financial investment products and executive appointments, to expel those engaged in unfair trading from the capital market through a 'one-strike-out' policy."

In addition, the first case of penalty surcharges for the three major types of unfair trading in the capital market (insider trading, price manipulation, and fraudulent trading) was also made public. The penalty recipient, an insider at Company A identified as Mr. B, obtained favorable information about the company's decision to repurchase its own shares through his work. Before the information was disclosed, he used an account in his spouse's name to purchase about 120 million won worth of company stock, earning approximately 24.3 million won in illicit gains. At its second extraordinary meeting held on the 18th, the Securities and Futures Commission decided to impose a penalty surcharge of 48.6 million won on Mr. B, equivalent to twice the amount of his illicit gains, the maximum allowed by law.

The Securities and Futures Commission explained, "Although the penalty recipient is a first-time offender and the amount of illicit gains is relatively small compared to other unfair trading cases, we determined that it is more important to ensure fairness in the capital market and restore the trust of general investors by taking strict action against insider trading using undisclosed material information."

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