Regulators Uncover Billion-Won Stock Manipulation Ring Tied to Business and Finance Elites

Lee Seung-woo, head of the Joint Task Force on Stock Manipulation, gives a briefing on the “first case related to unfair trading practices” at the Korea Exchange’s Seoul office in Yeongdeungpo District on September 23. (Yonhap)

SEOUL, Sept. 24 (Korea Bizwire) — South Korean regulators said Tuesday they had broken up a sophisticated stock manipulation scheme involving some of the country’s wealthiest business operators and financial insiders, in what is being billed as the first major case under President Lee Jae-myung’s new crackdown on market abuses.

The Financial Services Commission, the Financial Supervisory Service and the Korea Exchange said they raided more than ten homes and offices linked to seven suspects accused of orchestrating a large-scale operation that ran for nearly two years.

The group is alleged to have raised more than 100 billion won ($73 million) through corporate funds and bank loans, and then used manipulative trading tactics — including wash trades and high-priced orders — to lure investors.

Authorities said the suspects, who included hospital and private academy owners, a branch manager at a financial company and a former private equity executive, earned at least 23 billion won ($16.8 million) in illicit profits.

Investigators described the network as an “elite group” of entrepreneurs and finance professionals who colluded to carry out “meticulous and intelligent” market manipulation, only to be stopped midstream by coordinated enforcement.

The Nasdaq Composite Index is displayed on an electronic board at Hana Bank’s headquarters dealing room in Jung District, Seoul, on the morning of September 23. (Yonhap)

The operators allegedly placed tens of thousands of sham orders, creating the illusion of market momentum. They used dozens of accounts, spoofed internet addresses and even exploited corporate governance disputes to disguise their activities. Thinly traded stocks with limited float were the primary targets, with some share prices nearly doubling before the scheme was disrupted.

In an unprecedented step, the Securities and Futures Commission froze dozens of accounts tied to the trades, invoking a new legal tool introduced in April to halt payouts linked to market manipulation.

Officials said they intend to claw back illicit profits and impose fines of up to twice the amount gained, along with restrictions on securities trading and board appointments — a “one-strike-out” model intended to set a deterrent example.

The bull statue installed in front of the Korea Exchange (Image courtesy of Yonhap)

President Lee has vowed to make stock manipulation “a path to ruin,” declaring during his 100th-day press conference that the government would pursue harsh penalties for unfair trading.

The joint task force is also investigating several other major cases of suspected market abuse. In a separate ruling last week, the commission fined a listed company employee 48.6 million won — twice his illegal profit — for using undisclosed insider information to buy shares through his spouse’s account.

Ashley Song ([email protected])