‘LG Family Stock-Trading Allegations’: Yeonkyung Ku and Yoon Kwan Acquitted Again on Appeal ... ‘Lack of Direct Evidence’

[Financial News] Yeonkyung Ku, head of the LG Welfare Foundation and eldest daughter of the late Koo Bon-moo, former chairman of LG Group, and her husband, Yoon Kwan, head of BlueRun Ventures (BRV), have again been found not guilty on appeal. They had been indicted on suspicion of buying shares in a biotech company using material nonpublic information.
On the 11th, a three-judge panel of the Seoul High Court’s Criminal Division 4-3 (Presiding Judge Jeon Ji-won and Judges Kim In-gyeom and Seong Ji-yong) held a hearing to deliver its ruling on the appeals filed by Yoon and Ku, who were indicted on charges of violating the Financial Investment Services and Capital Markets Act (Capital Markets Act). The panel rejected both the prosecution’s appeal and the defendants’ appeal, upholding the first-instance ruling that found the two not guilty.
The first-instance panel, which had earlier found them not guilty, ruled that “it is difficult to find the charges proven based solely on circumstantial facts, and there appear to be more circumstances pointing the other way,” adding that “the prosecution appears to have been overreaching.”
The appellate panel likewise maintained that it would be difficult for the prosecution to prove guilt. The panel noted that “if the aim had been to maximize profits using nonpublic information, it would be difficult to explain why only some of the available funds were invested despite ample investment capacity, or why the shares were not later sold to realize actual gains.” It also said that “openly telling nearby employees about the purchase just before the information was disclosed is far removed from the behavior of someone seeking to make illicit gains using nonpublic information.”
On April 12, 2023, Ku bought 35,990 shares of KOSDAQ-listed biotech company Mezzion Pharma Co., Ltd. for approximately 650 million won. A week later, on April 19, it was disclosed that Mezzion would raise 50 billion won through a third-party allotment of new shares from BlueRun Ventures, where her husband, Yoon, was chief investment officer (CIO).
The panel acknowledged that the information qualified as “material nonpublic information.” It said that “even though it had not been finalized because it had not received approval from the investment review committee, it is reasonable to find that by around 8:45 a.m. on April 12, 2023, it had become sufficiently specific to affect ordinary investors’ decisions and had formed into material nonpublic information.”
However, the panel also accepted the defense’s argument, saying that “considering, among other things, when Ku said during an investigation by the Financial Supervisory Service (FSS) that she had learned of the new-drug development information, it cannot be ruled out that she learned of it through a channel other than Yoon and invested after recognizing its value.”
In particular, the panel ruled that “even if the shares were bought shortly after the information took shape and some circumstances were questionable, that amounts only to suspicion of guilt,” and that “it does not constitute direct evidence sufficient to establish the charges.”
The panel found that even if the spouse’s position, the timing of the information’s formation and the timing of the purchase coincided and raised suspicions, reasonable doubt could not be ruled out in the absence of direct evidence proving whether the information had actually been conveyed or concrete evidence such as messaging or call records. In effect, the ruling put the brakes on the prosecution’s reliance on circumstantial evidence in Capital Markets Act cases and strongly upheld the defendants’ right to mount a defense.
Meanwhile, Ku is involved in a separate inheritance dispute. Of the LG shares left by Koo Bon-moo, who died in May 2018, current chairman Koo Kwang-mo received 8.76%, while Mrs. Kim Young-sik and her two daughters divided the rest. In February 2023, the three women filed a lawsuit seeking recovery of inheritance, alleging that there had been deception in the inheritance process. The Capital Markets Act allegations also arose while Ku’s investment activities were being examined in the course of the inheritance dispute. A first-instance ruling in the inheritance recovery lawsuit is scheduled for next February.
[email protected] Lee Chang-hoon Reporter