Prosecution, financial regulators to jointly probe alleged massive stock manipulation

April 28, 2023

The prosecution and financial regulators will jointly investigate a suspected case of large-scale stock manipulation following the recent collapse of stock prices of eight companies, officials said Friday.

The Seoul Southern District Prosecutors Office said it will form a joint inquiry team with the Financial Services Commission (FSC) and the Financial Supervisory Service to investigate the suspicious trading allegedly led by an investment consulting firm.

The stocks of the eight domestic companies had been steadily rising since April of last year but began to plummet Monday following mass sell-offs through SG Securities Korea Co., the local branch of Societe Generale Group of France.

The authorities suspect the consulting firm inflated trading volumes and prices through matched orders, then dumped the stocks when regulators began to investigate.

As of Wednesday, the combined market cap of the eight companies, including Daesung Holdings Co., Samchully Co. and Sun Kwang Co., had plunged more than 7 trillion won (US$5.23 billion) compared with five days ago, according to the Korea Exchange.

On Thursday, the FSC raided the investment consulting firm, and the homes and offices of others involved in the alleged fraud.

On Monday, the prosecution imposed travel bans on 10 individuals suspected of participating in the scheme.

The company is also under investigation by police for operating a discretionary investment management business without registering with the government.

About 100 people, including popular ballad singer Im Chang-jung, claimed to have lost a combined 100 billion won after entrusting their investments to the company.

Many of them plan to file a complaint against the consulting firm next month with the prosecution on charges of fraud, according to a law firm representing the victims.

The Seoul Southern District Prosecutors Office building (Yonhap)
The Seoul Southern District Prosecutors Office building (Yonhap)