Financial authorities have uncovered a group of financial elites, dubbed the "financial mafia," who allegedly gained over 20 billion won (approximately $15 million) by exploiting non-public information related to corporate governance restructuring and mergers and acquisitions (M&A). Their assets have been frozen.
The suspects, hailing from prestigious university business clubs, global consulting firms, private equity funds, and KOSDAQ-listed companies, formed a type of "information cartel". They reportedly shared insider information and involved family and acquaintances in stock trading, systematically reaping unjust profits over an extended period.
On September 29, the joint task force, comprising the Financial Services Commission, the Financial Supervisory Service, and the Korea Exchange, announced that they had identified a group that used insider information from public buyouts and other governance restructuring activities to gain over 20 billion won in unjust profits.
On the same day, the task force conducted searches at more than 20 locations, including the homes and offices of the suspects, to gather evidence. Additionally, the Securities and Futures Commission has taken preemptive measures by suspending the accounts of the suspects where the unjust profits were stored, aiming to recover the funds for the state.
The key suspects, who connected through their activities in prestigious university business clubs and global consulting firms, later transitioned to private equity firms and listed companies, handling public buyouts and M&A-related tasks. They are accused of systematically sharing favorable insider information obtained during their work over the past five years, involving family and acquaintances in stock trading.
It is believed that the key suspects and their family and acquaintances purchased stocks before the information was made public and sold them at inflated prices after the information was disclosed, resulting in over 20 billion won in unjust profits.
The task force views this incident as a serious organized misconduct by financial elites. Task Force Leader Hwang Seon-o emphasized, "This is not a one-time deviation by specific individuals; rather, it reflects a long-standing pattern of information sharing within a close-knit information cartel. The professionals involved, who are bound by strict confidentiality obligations in M&A-related work, were the source of the information, and the fact that it spread to family and acquaintances significantly broadened the scope of unfair trading activities, making this matter very serious."
Individual unusual trading patterns of the suspects had been detected multiple times during market surveillance by the Financial Supervisory Service and the Exchange. However, the task force explained that it was difficult to respond due to a lack of clear evidence.
Based on experiences from previous cases involving the misuse of insider information by public buyout underwriters, the task force mobilized all available investigative resources since May of last year to uncover the full extent of the case. They expect to clearly substantiate the allegations based on the evidence secured during the recent searches.
The task force stated, "The use of insider information by insiders is a serious crime equivalent to stock manipulation. We will take a zero-tolerance approach against those found in violation."
They added, "This action reaffirms our commitment to recovering unjust profits gained through insider information, and we will ensure that general investors are not disadvantaged by information asymmetry, including imposing fines that could reach up to double the unjust profits after concluding the investigation."
* This article has been translated by AI.
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