'Youngpoong Paper stock-price manipulation' ringleader sentenced to 15 years in prison in first trial; fined 397.3 billion won

[Financial News] The ringleader of an organization accused of manipulating Youngpoong Paper's stock price and pocketing illicit gains worth hundreds of billions of won has been handed a heavy sentence in the first trial.
The 12th Criminal Division of the Seoul Southern District Court, presided over by Judge Park Jong-ryeol, sentenced Lee Jin-hoon, 57, to 15 years in prison and a fine of 397.3 billion won on the 30th for charges including violations of the Financial Investment Services and Capital Markets Act. The court also ordered the forfeiture of approximately 132 billion won.
Mr. Yoon and Mr. Kim, who were indicted as accomplices, were each sentenced to six years in prison and fined 397.3 billion won, and six years in prison and fined 386.7 billion won, respectively. More than 10 other accomplices who participated in the market manipulation received actual prison terms ranging from two years and six months to five years, or suspended prison sentences. For some defendants, the imposition of fines was deferred. The court also revoked the bail of Yoon and others who had been out on bail among those sentenced to prison.
Lee and the others were indicted on charges of artificially driving up Youngpoong Paper's stock price by using 444 accounts to place more than 230,000 market-manipulation orders between Oct. 25, 2022, and Oct. 17, 2023, thereby obtaining illicit gains in the 780 billion-won range.
The court said, "This was a crime that caused significant social harm by undermining the trust of ordinary investors and impeding the sound development of the capital market. The market distortion was severe, with the stock price rising approximately 14-fold in a single year as a result of the crime, and the illicit gains obtained by the defendant amounted to an astronomical sum of approximately 130 billion won. As the stock price, which had risen so sharply, plunged in an instant, innocent investors suffered losses that were difficult to recover."
It added, "The defendants' market manipulation caused considerable shock to many investors. Severe punishment commensurate with their culpability is necessary to establish a fair trading order, prevent the recurrence of market-manipulation crimes, and restore investors' confidence in the capital market."
The court particularly found that Lee planned and led the overall scheme, recruited members and assigned them roles, and played a central role in managing the accounts and funds used in the crime. It also considered his attempt to flee overseas after the investigation began and his previous punishment for a similar crime as unfavorable sentencing factors. However, the court took into account as favorable factors that he admitted to the crime and helped clarify the facts of the case by describing the extent of the accomplices' involvement.
The court found that the Financial Supervisory Service's collection of additional financial records at the Prosecution Service's request after the Prosecution Service launched its investigation on Oct. 4, 2023, was unlawful. Although the FSS's additional inquiry took the form of an administrative investigation, it was substantively part of a criminal investigation, meaning the records should have been obtained under a warrant. The court said the process could not be viewed as a simple fact-finding inquiry because the FSS acquired and examined new records rather than providing records it already possessed to the Prosecution Service. It also explained that even though the Prosecution Service later obtained a search-and-seizure warrant for the FSS and secured evidence related to the case, that did not cure the illegality of the initial collection process.
Accordingly, the court recognized only approximately 132.4 billion won in realized profits generated through the 113 accounts initially investigated between Oct. 25, 2022, and Aug. 18, 2023, as illicit gains. However, it found the fact that the group had manipulated the market through 444 accounts until Oct. 17, 2023, to be proven guilty based on other lawful evidence.
The court also rejected the defendants' claim that they had no actual profits because they used their trading gains to buy more shares. It said that the fact that profits were generated did not change even if the gains were reinvested in the scheme after being realized. The court further found that the funds were managed under Lee's effective control before being distributed to the accomplices and ordered the entire recognized amount of illicit gains to be forfeited from Lee.
Attorney Shin, who helped Lee evade capture, was sentenced to one year and six months in prison, suspended for three years. Mr. Kim, who was found guilty of aiding the concealment of a criminal, was fined 2.5 million won. Another Mr. Kim, who was indicted on charges of participating in the escape, was acquitted because intent was not established.
Earlier, at the final hearing in July, the Prosecution Service sought a 20-year prison sentence and a fine of approximately 1.0947 trillion won for Lee.
[email protected] Park Sung-hyun Reporter