W45 billion in Deutsche assets frozen

By Kim Da-ye

A Seoul court Wednesday froze Deutsche Bank’s assets worth 44.8 billion won, suspected to have been gained through market manipulation in November last year.

A 50-point plunge in the benchmark Korea Composite Stock Price Index (KOSPI) during the last two minutes of trading on Nov. 11 last year was found to have been caused by 1.6 trillion won (about $1.47 billion) worth of sell orders transacted through Deutsche Bank, an incident financial authorities have since dubbed as an “option shock.”

The Seoul Central District Court accepted the request by the Seoul Central District Prosecutors to freeze the assets of Deutsche Bank and its securities unit so that the suspects cannot freely dispose of them before it is determined if the unfair profits would be restituted.

The 44.8 billion won is known to be part of Deutsche Bank’s deposits in an account at the Seoul branch and another at HSBC. Deutsche Bank said Thursday in a statement that it knows of the temporary seizure order.

“We understand that a preservation order was granted by a court at the prosecutors’ request and without Deutsche Bank’s arguments being heard,” Michael West, the company’s spokesman, said.

“The order does not reflect the merits of any case that may be heard in the future. No charges have been laid against Deutsche Bank, its Korean subsidiaries or staff and the bank continues to cooperate with the prosecutors’ ongoing investigation.”

The prosecutors are investigating the Frankfurt-based lender for causing a massive drop in stock prices in order to gain 1.1 billion won from option contracts that are designed to yield profits when the market falls.

The bank has already been hit with a record fine of 1 billion won by the Korea Exchange (KRX), and the Korean financial regulator banned it from trading stocks and derivatives from its own account for six months.

The regulator also reported five employees of the lender to the prosecutors, but none allegedly answered the summons.

Prosecutors often find it difficult to investigate and charge suspects based overseas because they won’t answer the summons. But two former employees of the Hong Kong branch of the Zurich-based Credit Suisse were charged last week for profiteering from stock price manipulation.

A prosecutor in charge of public relations refused to comment on the progress of the investigation into Deutsche Bank.

On Nov. 11 the benchmark KOSPI fell 53.12 points from a day earlier, closing at 1914.73. The sudden foreign selling of stock options came on the date of their expiration, which caused massive losses for some KOSPI investors. The Financial Supervisory Service (FSS) said that Deutsche Bank was responsible for the large-scale net selling of 1.6 trillion won worth of stocks and therefore the huge fall in the Korean stock market.