31 Stock-Market Tax Evasion Cases, Including Stock Manipulation and Tunneling, Under Tax Audit... Suspected Amount Reaches KRW 2 Trillion

[The Financial News] #. A stock-manipulation ring, identified as A, acquired manufacturing-listed company B and lured retail investors by pretending to launch a new business. It issued hundreds of millions of won in fake tax invoices without any real transactions and transferred investment funds to a local affiliate whose business operations were unclear. After the stock price rose, multiple speculative groups reaped huge capital gains through convertible bonds. The result was a flood of shares that hit small investors hard.
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According to the NTS on the 6th, it will launch a second round of tax audits targeting unfair stock-market tax evaders, including stock manipulation cases like A's, following the first round in July last year. The investigation will cover a total of 31 companies involved in stock manipulation, tunneling, and illegal stock-recommendation chat rooms. The total suspected tax evasion amount exceeds KRW 2 trillion.
There are 11 companies that profited from stock manipulation and accounting fraud. They lured retail investors by falsely promoting new business ventures and imminent listings, then concealed capital gains by selling shares they had accumulated in advance through paper companies and borrowed-name accounts.
In other cases, companies with solid business performance were delisted because they deliberately failed to submit materials during audits, resulting in an adverse audit opinion. Among the listed companies under investigation, more than half had trading suspended due to audit opinions such as a refusal of opinion from external auditors, and their stock prices plunged to as little as one-tenth of their previous levels.
There are 15 tunneling cases involving companies and controlling shareholders who created channels to divert funds or assets to the owner’s family through corporate transaction structures. They treated listed companies as if they were privately owned, directly siphoning off profits or subtly inserting themselves into supply chains to extract money through toll-like payments. In one case, a company funneled work to a firm set up by the owner’s spouse, then diverted funds through sham transactions with a nominee corporation established by an acquaintance of the spouse.
There are five illegal stock-recommendation chat rooms that defrauded vulnerable investors. After gaining fame through platforms such as YouTube, they approached financially vulnerable groups, including young workers with little investment experience and older adults, and pressured them to join with sensational messages. Before announcing recommended stocks, they accumulated their own holdings in advance. When the stock price rose, they used members as so-called exit liquidity and pocketed illicit gains.
Earlier, the NTS uncovered KRW 615.5 billion in tax evasion in July last year by zeroing in on false disclosures, professional corporate raiders, and controlling shareholders who engaged in self-dealing. Ahn Deok-su, Director General for Tax Investigation, National Tax Service, emphasized, "We will make every effort to ensure that the public firmly understands that no one can make even a single won of profit through unfair trading in the stock market, and that such conduct will only come back as a heavier tax burden."
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syj@fnnews.com Seo Young-joon Reporter