‘Information cartel’ linked to prestigious university business club raided over ‘20 billion won in illicit gains’

[Financial News] Financial authorities have launched a compulsory investigation into an alleged “information cartel” accused of sharing undisclosed information about tender offers and mergers and acquisitions (M&A) involving listed companies and pocketing more than 20 billion won in illicit gains.
The Joint Task Force for Eradication of Stock Price Manipulation, comprising the FSC, the Financial Supervisory Service, and the Korea Exchange (KRX), conducted search-and-seizure operations on July 29 at about 20 locations, including the homes and workplaces of suspects in a case involving the alleged use of undisclosed information. The suspects included financial experts from global consulting firms, private equity fund (PEF) managers, and former listed-company employees. The Securities and Futures Commission (SFC) also froze the securities accounts of some suspects.
According to the Joint Task Force for Eradication of Stock Price Manipulation, the key suspects became acquainted through business clubs at prestigious universities and global consulting firms before moving to PEF managers and listed companies, where they handled tender offers and other M&A work. They are suspected of repeatedly sharing favorable undisclosed information about numerous stocks that they learned through their work over the past five years.
They allegedly made illicit gains by buying the stocks before the information became public and selling them after their prices rose. Authorities are also examining indications that the suspects passed the information to family members and acquaintances so they could use it for trading. Authorities estimate the total illicit gains at more than 20 billion won.
The case was first detected during the KRX’s market surveillance. After grouping and analyzing cases involving the same suspects repeatedly, the Joint Task Force for Eradication of Stock Price Manipulation began a joint investigation with relevant agencies in May this year. Previously, the Joint Task Force conducted a search and seizure last October in connection with allegations that an executive of NH Investment & Securities, the lead manager for a tender offer, had used undisclosed information. It filed a complaint in May this year.
The Joint Task Force for Eradication of Stock Price Manipulation plans to analyze the materials obtained through the search-and-seizure operations, complete additional investigations, and take follow-up measures, including filing complaints and imposing administrative fines. Under the Capital Markets Act, an administrative fine of up to twice the illicit gains obtained through the use of undisclosed information may be imposed.
An official from the Joint Task Force for Eradication of Stock Price Manipulation said, "We will continue to monitor, investigate, and punish unfair trading involving undisclosed information from listed companies, tracking such activity to the end so that ordinary investors do not suffer losses due to information asymmetry."
[email protected] Lee Jeong-hwa Reporter