[Initial Insight] Distinguishing the 'Innocent Victims' in the CFD Incident

Whenever major financial scandals such as the Lime and Optimus incidents occur, the framing of the issue tends to be somewhat typical. The core causes of the incidents are usually attributed to the financial authorities' poor management and delayed response, incomplete sales by financial companies, and the absence or malfunction of investor protection systems. Individual investors are mostly regarded as innocent investors or victims who were deceived by financial company sales staff.

The process of resolving the issue according to this frame generally follows a similar procedure. When the media and political circles side with the majority of individuals and raise critical voices against the authorities and financial companies, investigations and disciplinary procedures against the chairman or CEO of the financial company begin. The political sphere and financial authorities pressure the financial companies involved in selling or managing financial products to compensate individual investors for their losses. Financial company leaders tend to comply with such pressure, at least to avoid severe disciplinary actions.

This frame and method of resolution are not entirely wrong. It is also the approach that faces the least social resistance. However, is it appropriate to view the recent stock price manipulation case using Contracts for Difference (CFD) through this same frame? To answer this question, we must first determine whether all individual investors who suffered significant losses from CFDs can be considered innocent victims.

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The full details of this case have not yet been revealed. According to reports so far, the group led by Chairman A is composed of the Sales Team, Trading Team, and Futures Team. When an investor decides to invest a large sum, they are provided with a burner phone. The sales team comes in pairs to explain in detail, opens a stock account under the investor's name using that phone, and then takes back the phone containing the account and authentication certificates. When a certain profit is made, they settle the amount, and the group continues stock price manipulation using collusive trading through the accounts.

Based on this information, there is much evidence to infer that the individuals who participated in the investment were aware from the beginning that the transactions involved abnormal and illegal routes. Entrusting hundreds of millions to billions of won along with an account, official certificates, and passwords under the investor's name to others, and creating burner phones under the investor's name for trading are clearly neither normal nor reasonable to anyone.

Among the investors are celebrities and janitors, but it is known that many high-ranking political and business figures and high-income professionals are included. Most investors likely had the primary goal of high returns through leveraged investments. It is also possible that they tolerated or overlooked illegal or irregular practices for negative purposes such as evading capital gains tax through CFD investments or avoiding exposure of investment positions based on their status. Of course, they may not have anticipated stock price manipulation using CFD investments.

If they knew the process was illegal or irregular but turned a blind eye, the individuals who participated in the investment should be regarded not as innocent victims but as simple accomplices or bystanders in the stock price manipulation. Those who introduced or helped recruit investors in the middle would be considered more active participants. Although singer Lim Chang-jung claimed in a media interview that he lost tens of millions of won as a victim, suspicions that he was partly involved arise from this background.

For these reasons, it is necessary to move away from the perspective that most individual investors are innocent victims when interpreting and handling this case. Only then can it be possible to assign post-incident responsibility as fairly as possible.

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