CEO, Stock Manipulator Arrested for $5.7 Billion Fraud in Debt-Fueled Takeover

A KOSDAQ-listed company's CEO and a stock manipulation expert face charges for orchestrating a scheme that generated billions of won in illicit profits. The CEO, identified as Mr. N (58), allegedly secured control of the machinery and parts manufacturer, Company A, through a debt-financed merger. He reportedly borrowed 14.5 billion won from a savings bank using the company's shares as collateral, effectively acquiring a 19.96% stake for 18 billion won without investing his own capital.

Prosecutors claim that to secure funds for investors and prevent the collateral shares from being sold off, Mr. N planned the stock manipulation. He allegedly hired a stock manipulation expert, Mr. D (58), providing over 3 billion won for the operation. Mr. D then used nine accounts under different names to execute manipulative trading orders.

Between May 15 and July 10, 2017, the two are accused of repeatedly submitting manipulative orders, totaling 30,221 instances. This activity is believed to have artificially boosted Company A's stock price, leading to an estimated 5.7 billion won in unjust enrichment. The stock price surged approximately 41.5% from 14,200 won on May 12, 2017, to a high of 21,000 won by May 26.

This is not the first time Mr. N has been linked to debt-free mergers, while Mr. D has a prior conviction for similar offenses, having re-offended shortly after his release. A prosecutor stated that the authorities will continue to take a firm stance against financial and securities crimes that undermine the fairness and reliability of the capital markets.

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We will continue to respond strictly to financial and securities crimes that undermine the fairness and reliability of the capital markets.