A group that built an "information cartel" through ties formed at a university club and shared price-sensitive undisclosed information for years, reaping more than 20 billion won ($14 million) in illicit gains, has been caught by a joint task force on stock price manipulation.
The joint task force, made up of the Financial Services Commission, the Financial Supervisory Service and the Korea Exchange, said on the 29th that it had searched more than 20 locations, including the workplaces and homes of officials at private equity fund managers and listed companies suspected of the scheme. The Securities and Futures Commission also froze payments from the suspects' brokerage accounts holding the illicit gains under the Financial Investment Services and Capital Markets Act.
According to the task force, about five core suspects repeatedly shared favorable undisclosed information on five stocks that they obtained in the course of their work over roughly the past five years. They also passed the information to family members and acquaintances for use in stock trading. The suspects bought the shares before the information was disclosed to the market and sold them at higher prices once the stocks rose after disclosure, reaping more than 20 billion won in total illicit gains.
The core suspects are in their 30s and 40s and all came from the same management consulting club at Seoul National University, according to the task force. All of them also built their careers at the same global consulting firm. They later moved to private equity fund managers or took executive posts at listed companies, where they handled merger and acquisition work such as tender offers.
The task force first identified accounts suspected of trading on undisclosed information through the exchange's market surveillance, then traced the links between the stocks traded and the people involved. It combined cases in which the same suspects were repeatedly implicated for in-depth analysis, and from May it conducted the investigation in cooperation with the relevant agencies.
"We have been investigating for two years, and we confirmed the personal connections by widening the scope through extensive fund tracing, trading analysis and examination of personal relationships," an official at the task force said. "Through the searches, we will verify the facts by checking whether the evidence matches the statements." Once the additional investigation is completed, follow-up steps such as referral to prosecutors and fines of up to twice the illicit gains are planned.
