Legal tussle escalates over suspicious stock selling scandal
From left are Daou Kiwoom Group Chairman Kim Ik-rae and Ra Deok-yeon, head of an investment advisory firm. Yonhap
By Lee Min-hyung
Two figures involved in the latest stock manipulation scandal are escalating ensuing legal battles and claiming innocence regarding the abrupt collapse of eight listed shares here.
Ra Deok-yeon, head of a Seoul-based investment advisory firm, insisted Daou Kiwoom Group Chairman Kim Ik-rae is the key man behind the latest stock scandal, as he went on a selling spree of Daou Data shares worth tens of billions of won shortly before their value plummeted last month.
Daou Data is among the eight firms whose stock value recently plunged without any clear reason.
The prosecution is intensifying investigations into major suspects of the incident. Ra is suspected of driving the stock manipulation. But he denies the allegations and has expressed his intention of suing Kim for damages, citing his suspiciously-timed stock sales.
Kiwoom Securities also shared its plan to file a suit against Ra for spreading false information.
It remains to be seen which side is making false claims, with both sides completely denying the stock manipulation allegations.
Amid the escalating scandal, a group of investors took a class action against Ra and the advisory firm. According to Daegun, a law firm representing them, six officials including Ra engaged in the stock manipulation. Some 130 investors have joined the class action and their combined damages are estimated to be worth more than 100 billion won. Singer Im Chang-jung and some other celebrities are also known to have invested in the company.
Singer Im Chang-jung claims he fell victim to the latest stock manipulation scandal. / Yonhap
The latest scandal is centered on some listed shares, such as Samchully and Daou Data, which suffered a sharp decline of more than 20 percent for a few consecutive trading days late last month. This was triggered by a mass selling spree of the shares via France-based Societe Generale on April 24.
Financial watchdogs raided the office of the consulting firm and the residence of its employees. Investigators consider Ra and a former professional golfer, surnamed Ahn, as two key suspects. Ra is expected to face a charge of violation of the Capital Market act. Ahn is known to have played a key role in attracting wealthy investors. Ra placed his name on the list of internal directors of Ahn's golf academy.
A joint investigation team is now tracking data from about 200 smartphones that the advisory firm allegedly used to manipulate stocks. The company did not report its business activity to financial authorities.
The scandal-tainted shares extended losses even on Tuesday. The stock price of Daou Data fell to around 16,000 won per share on the same day, returning most of its recent gains in the first quarter. Samchully shares also went on a losing streak of more than 8 percent during the same period. Its value plummeted to around 140,000 won per share, a drop of more than 70 percent before the incident erupted late last month.
Kim Dae-jong, professor of business administration at Sejong University, said the Kiwoom chief should have shown more social responsibility.
“Even if major shareholders can buy and sell their shares while abiding by relevant rules, they should think twice before taking such actions, as the market can react very sensitively to their decisions as was shown by the latest one by the Kiwoom chief,” the professor said.