15,908 manipulation orders drove share price surge

Accomplice charged separately for aiding scheme

[Yonhap]
[Yonhap]

A full-time investor who allegedly manipulated the share price of a Kosdaq-listed company for three years and five months, pocketing 6.2 billion won ($4.49 million) in illicit gains, has been indicted in custody.

The Seoul Southern District Prosecutors' Office said Thursday it had indicted the suspect, identified only as A, on charges of violating the Capital Markets Act. A second suspect, B, a full-time investor who allegedly aided the scheme at A's request, was summarily indicted on charges of abetting the violation.

A is accused of repeatedly placing manipulation orders while steadily accumulating shares between January 2020 and May 2023, artificially driving up the stock price. The share price of the targeted company rose from 11,800 won to 45,800 won over that period, at one point surging as high as 51,100 won.

Investigators found that A, drawing on years of experience as a full-time investor, deliberately targeted a Kosdaq-listed company with a small float, making it easier to manipulate the price. The company designs, manufactures and installs powder conveying systems including pipes for transporting coal dust, and was listed on Kosdaq in December 2009.

A approached 26 acquaintances — including businesspeople and doctors met at upscale wine and dining gatherings — with promises of investment returns, obtaining 47 brokerage accounts, six contract for difference accounts and funds from them. A also borrowed about 12 billion won from cryptocurrency traders and private lenders to finance the scheme.

Total deposits into the accounts during the scheme reached 74.5 billion won. Using various forms of leverage — including margin financing, stock-backed loans and CFDs — A purchased about 340 billion won worth of shares in total. As a result, A's holdings in the stock grew from 8 percent to more than 40 percent of the shares in market circulation.

Facing the threat of forced liquidation due to excessive leverage, A asked friend B to place high-price buy orders and engage in wash trading. Together, A and B submitted 15,908 manipulation orders, investigators found.

The share price subsequently tumbled after the company's earnings deteriorated due to COVID-19 and overseas conflicts, and a price decline in May 2023 triggered a cascade of forced liquidations by brokerages on A's holdings. The stock fell from 45,800 won to 22,050 won in just four days from May 15, 2023.

Case overview [Provided by Seoul Southern District Prosecutors' Office]
Case overview [Provided by Seoul Southern District Prosecutors' Office]

Investigators determined that A's illicit gains from the manipulation amounted to 6.2 billion won. Including accounts belonging to acquaintances whose investments A managed on a discretionary basis, prosecutors estimated total gains reached approximately 49.7 billion won.

A was also found to have received about 1.6 billion won in exchange for managing the stock investments of acquaintances.

A used the criminal proceeds to live in a luxury villa and spent the equivalent of 20 million to 30 million won on credit card bills each month.

The Financial Supervisory Service detected A's suspected manipulation while monitoring stocks flagged for unusual activity and referred the case to prosecutors.

During the investigation, prosecutors also found evidence that A had attempted to destroy evidence — deleting Telegram message histories with the accomplice immediately after the scheme and asking account holders to give false statements.

"This is a case of ultra-long-term leveraged market manipulation in which the defendant, having cultivated an image as a successful 'super ant' investor, used stock price manipulation disguised as long-term investment in quality shares to obtain illicit gains," a prosecutors' office official said.


newday@heraldcorp.com