By Nam Hyun-woo
About 200 retail investors will file a collective action suit against Hanmi Pharmaceutical, calling for the drug maker to compensate them for losses from alleged insider trading and a belated regulatory filing of information on the collapse of a major deal.
Lawyer Yoon Jae-sun of law firm Jeha, representing the retail investors, said, “We are going to file a damages suit with the Seoul Central District Court this Friday after figuring out the exact amount of losses the 200 individual investors sustained.”
He said the number of investors joining the suit will likely increase as there are more yet to join who are now sending their data to the law firm.
“Even though an activity is an accident, it constitutes a civil damage suit,” he said. “Hanmi was able to expect a rise in its shares, and belatedly posted the termination of its key deal. If there was any insider trading, it is more serious.”
The suit comes as the prosecution said that it is investigating a Hanmi Pharmaceutical employee and her boyfriend on suspicion that they leaked the company’s inside information.
The Seoul Southern District Prosecutors’ Office said that it has booked the Hanmi employee, surnamed Kim, 27, and her boyfriend, 27, surnamed Jeong, on charges of violating the Financial Investment Services and Capital Markets Act.
Prosecutors raided more than 10 brokerage houses Wednesday. During the investigation, the prosecutors also raided Jeong’s house.
Kim works at Hanmi’s contract division and Jeong is an office worker. The prosecution will focus on whether Kim was involved in unfair trading through non-public information or provided the information to those who engaged in a massive volume of short selling before Hanmi posted a related notice.
Short selling refers to a trading strategy in which an investor sells borrowed shares in anticipation of a price decline. After the decline, the investor can buy the shares at a lower price and gain from the margin.
Hanmi’s shares caused a huge stir in the local stock market last month, as the company posted both favorable and unfavorable announcements within two days. On Sept. 29, the company posted news of a big drug deal after the day’s session. The company’s shares soared as soon as the following session opened, but quickly plunged after the company posted the news of the termination of an 850 billion won drug cancer license just 30 minutes after the opening.
Financial authorities found that there was a massive volume of short selling during the 30 minute period and they requested that the prosecution investigate the case.
An official at the prosecutors’ office told reporters, “Nothing has been confirmed yet, but Kim and Jeong are the target of an investigation because there is a chance that they were involved in the potential information leak.” The official said the prosecution has yet to confirm whether Jeong handed over the information to short sellers.
In Wednesday’s raid, prosecutors seized computer hardware, internal documents and mobile phones of employees at securities firms, including NH Investment & Securities and Shinhan Investment.