[Yonhap]
[Yonhap]

The Seoul Southern District Prosecutors' Office said Tuesday it had indicted three people on charges of violating the Capital Markets Act for acquiring a Kosdaq-listed company without their own capital and then manipulating its share price.

Two of the defendants, identified only as A and B, were arrested after an arrest warrant was issued July 21 and will stand trial in detention. A third defendant, C, will be tried without being held in custody.

According to prosecutors, A, a former chief executive of the listed company, lured investors by promising to guarantee their principal and distribute 70 percent of investment returns. He raised 14.5 billion won ($10.1 million) in loans using shares of the target company as collateral and, in March 2017, acquired a 19.96 percent controlling stake — 1,636,364 shares — for 18 billion won.

The company, which manufactures and sells cargo-handling machinery, has been listed on Kosdaq since 2005. A arranged through inside director C to pay share-price manipulation specialist B more than 3 billion won to carry out the scheme.

B used nine nominee accounts to submit a total of 30,221 manipulative orders, repeatedly driving up the share price. The defendants reaped illicit gains of about 5.7 billion won in the process.

The company's share price rose roughly 41.5 percent during the scheme, climbing from a closing price of 14,200 won on May 12, 2017, to a high of 20,100 won on May 26 of the same year.

"This case is a textbook zero-capital merger and acquisition scheme — acquiring a listed company without one's own funds through share-backed loans and investor recruitment, then generating illicit profits through share price manipulation," prosecutors said.

A was found to have been directly or indirectly involved in other zero-capital M&A cases as well. B had previously been convicted and served prison time for the same type of offense before reoffending, investigators found.


joze@heraldcorp.com