Defendants charged with rigging share prices for illicit gains

Stock surged 14-fold in a year, leaving investors with heavy losses

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The ringleader of a scheme to manipulate the share price of Youngpoong Paper has been sentenced to prison in a first-instance ruling.

Seoul Southern District Court's Criminal Division 12, presided over by Judge Park Jong-yeol, sentenced Lee Jin-hun, the scheme's mastermind, to 15 years in prison and a fine of 397.3 billion won ($292 million) on charges including violations of the Capital Markets Act on Aug. 30. The court also ordered the forfeiture of 132.43 billion won.

Co-conspirators tried alongside Lee received their own prison terms and financial penalties.

The court said Lee had played a central role in planning and directing the entire operation — dividing up responsibilities among participants and recruiting and managing the accounts and funds used in the scheme. The court also took into account his attempt to flee the country by sea after investigators began closing in.

In explaining the sentences, the court said the manipulation had distorted the market by driving Youngpoong Paper's share price up roughly 14-fold in a single year, and that the illicit gains were "an astronomical sum."

"When the artificially inflated share price collapsed in an instant, innocent victims were created, and securities firms suffered enormous losses through margin trading," the court said. "This case delivered no small shock to a great many investors in society."

The court said share-price manipulation "distorts prices that should be set by supply and demand, undermines the trust of ordinary investors, and impedes the sound development of capital markets," adding that "strict punishment is necessary to establish a fair trading order and restore investor confidence in capital markets."

The defendants are accused of manipulating Youngpoong Paper's share price between October 2022 and October 2023 by repeatedly placing large buy and sell orders through 444 securities accounts — using wash trading, matched orders and high-price purchase orders to artificially move the stock.

Prosecutors determined that the operation was structured as a cell network, with a ringleader overseeing three teams of roughly 20 people in total. As the investigation progressed, additional individuals who helped the ringleader evade capture or otherwise participated in the scheme were also indicted.

The group was charged with reaping a combined 789.8 billion won in illicit gains — an amount prosecutors said was the largest ever confirmed in a single-stock manipulation case in South Korea.

However, the court ruled that trading records and other evidence obtained through the Financial Supervisory Service without a warrant after prosecutors formally launched their investigation on Oct. 4, 2023 could not be used as evidence of guilt, finding the warrantless collection violated the warrant requirement.

As a result, the court recognized only about 132.4 billion won — the realized profits from 113 accounts secured before Aug. 18, 2023, prior to the warrantless collection — as actual illicit gains.


newday@heraldcorp.com