‘Hot Stock’ Articles Paid at 300,000 Won Each ... Accountant and Reporter Sent to Trial for Pocketing 9.3 Billion Won Through Front-Running

[Financial News] An accountant and several reporters who abused upbeat “hot stock” articles to carry out front-running trades and reap about 9.3 billion won in illicit gains have been indicted.
The Financial Investigation Division 2 of the Seoul Southern District Prosecutors' Office, led by Chief Prosecutor Kim Taekyem, said on the 29th in a briefing on the interim investigation results that it had indicted a total of eight people, including A, a former accountant and head of a quasi-investment advisory firm, six current and former reporters, and one retail investor, on charges including violations of the Financial Investment Services and Capital Markets Act.
According to prosecutors, A's group bought small-cap and theme stocks with low trading volume or high price volatility in advance, then wrote and distributed related hot stock articles. When share prices rose, they sold the stocks and made capital gains in what amounted to front-running.
A, who was arrested and indicted, conspired with reporter B, whom he knew personally, and recruited reporters C, D and F on the condition that each article would be paid 300,000 won. C, who served as the key contact, later brought in reporter E under the same terms. Retail investor G also took part in selecting stocks and drafting and delivering article drafts.
From October 2020 until June last year, just before a raid by the Financial Supervisory Service, they used about 1,800 hot stock articles in front-running schemes and are believed to have made 8.55 billion won in illicit gains over roughly four years and eight months.
The estimated illicit gains by individual were 7.13 billion won for A, 750 million won for B, 350 million won for C, 260 million won for D, and 60 million won for G.
In supplementary investigations, prosecutors found that large sums of money were exchanged as payment for distributing the articles. A and C gave E about 150 million won, while A paid D about 116 million won and F about 28 million won.
A handed over check cards issued in his own name, either directly or through C and others, to D, E and F, and had them withdraw cash from ATMs. They also used methods such as leaving cash in a gym locker or transferring money to bank accounts. Prosecutors applied charges of breach of trust for profit, bribery, and violations of the Act on the Prohibition of Solicitation and Graft.
Separately, reporter H was arrested and indicted for carrying out front-running on his own by abusing the fact that he had the authority to distribute articles.
H is accused of making about 740 million won in illicit gains by using 340 articles from October 2022 to July 2024. Prosecutors also charged him with violating the Act on Regulation and Punishment of Criminal Proceeds Concealment, saying he hid the origin of 550 million won of those gains by trading through securities accounts in acquaintances' names.
The Financial Services Commission filed the initial complaint in February last year. The Special Judicial Police Officer for Capital Markets at the Financial Supervisory Service then analyzed account transactions and stock trading records and uncovered additional offenses not included in the original complaint. Prosecutors received the case on the 18th of last month and carried out supplementary investigations, including re-interviews with those involved and analysis of Telegram conversations and account records. As a result, they confirmed that C had effectively led the scheme together with A and had paid E for distributing the articles. C and E were then arrested.
The Criminal Proceeds Recovery Division of the Seoul Southern District Prosecutors' Office also found that A and B disposed of existing real estate after the raid to avoid preservation of confiscation, then used the sale proceeds to acquire new property. B was found to have used a spouse's name. Prosecutors additionally preserved the newly acquired properties and froze financial assets.
An official at the Seoul Southern District Prosecutors' Office said, "We will work closely with the Financial Supervisory Service and respond strictly to financial and securities crimes." The official added, "We will do our utmost to maintain the prosecution so that the defendants receive punishment commensurate with their crimes, and we will track down and strip away criminal proceeds to the very end."
[email protected] Park Sung-hyun Reporter