Stock Manipulation Ring Evades Taxes with False Disclosures, National Tax Service Recovers 257.6 Billion Won Through Audits

National Tax Service Conducts Intensive Audit of 27 Stock Market Tax Evaders
Unreported Earnings Reach 615.5 Billion Won
Additional Taxes Imposed and Cases Referred for Prosecution

Listed company A, which manufactures mechanical equipment, announced plans to pursue new businesses such as eco-friendly energy and established paper companies under the names of employees as representatives, contributing a total of several billion won in the form of capital investments and loans. Subsequently, these paper companies created false lease contracts and siphoned off tens of billions of won, providing the funds to the owner, and embezzled corporate funds through fabricated tax invoices. When it was revealed that A’s new business initiatives were fabricated, the company’s share price plunged to one-third of its previous value, leading to delisting and significant losses for minority shareholders. The National Tax Service filed charges against the owner and the company with investigative authorities in addition to imposing additional income tax assessments.

On March 5, the National Tax Service announced that it had conducted tax audits on unfair tax evaders in the stock market, collecting an additional 257.6 billion won in taxes and referring 30 cases to the prosecution.

Andeoksoo, Director of the National Tax Service Investigation Bureau, is announcing the results of the "Tax Investigation on Unfair Tax Evaders in the Stock Market" at the Government Sejong Complex on the 5th. National Tax Service

Anduksoo, Commissioner of the National Tax Service's Investigation Bureau, stated, “From July last year to February this year, the National Tax Service conducted intensive tax audits on stock market tax evaders. Through thorough verification of 27 companies and related individuals—including stock price manipulation groups who lured investors with false disclosures and corporate raiders who destroyed sound companies through embezzlement—we identified a total amount of 615.5 billion won in tax evasion.”

The subjects of this investigation were a total of 27 companies and related individuals in the stock market who infringed on the interests of minority shareholders. This includes companies that made false disclosures for the purpose of stock price manipulation, professional corporate raiders, and controlling shareholders who pursued private interests by privatizing listed companies. As a result of the investigation, 94.6 billion won was assessed on those who made false disclosures, 41 billion won on corporate raiders, and 122 billion won on those who pursued private interests as controlling shareholders.

First, companies that made false disclosures for the purpose of stock price manipulation inflated their share prices by announcing plans to enter promising new businesses or exaggerating company performance, then fabricated supporting documents after the announcement. In one case, when a company's owner faced delisting risk due to a lack of sales, he colluded with representatives of other companies he knew to fabricate sales of medical supplies, which were in high demand during the COVID-19 pandemic. These false disclosures artificially prolonged the life of struggling companies, and tens of billions of won were siphoned off using a medical device distributor whose representative was a family member of an employee.

A loan shark was also caught acquiring shares of a listed company under the names of relatives to take over management rights anonymously, then manipulating the share price and engaging in short-term trading to realize more than 8 billion won in illicit gains. In another case, the owner of a listed company mobilized employees to conduct over-the-counter share transactions at extremely low prices in order to transfer control of an unlisted company he controlled to his children at a bargain price. By artificially creating a market price well below one-third of the actual value, he gifted the shares to his children and unlawfully under-reported the gift tax.

The National Tax Service plans to continue monitoring the overall stock market, including sudden share price changes and abnormal trading patterns, and will conduct follow-up investigations to strictly track and crack down on unfair trading. Commissioner An stated, “If, during our investigations, we confirm tax offenses such as destruction of books and records, manipulation or concealment of transactions, or concealment of assets, we will refer the cases to investigative authorities to ensure criminal penalties such as imprisonment or fines. Through these measures, we aim not only to recover illicit economic gains but also to ensure that market disruptors such as stock manipulators are subject to a one-strike-out rule and removed from the market.”

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