[비즈한국] Mr. A, often called a "big hand" among the circles of wealthy investors (known as "jeonju" or "money suppliers") involved in stock manipulation, claims he can easily mobilize tens of billions of won. He even boasts that he is the first to receive proposals for almost any attempted stock manipulation scheme. He secures stocks by investing in convertible bonds (CB) and bonds with warrants (BW) issued by listed companies, and then sells them for a profit once the price rises.
He is frequently summoned or subjected to search-and-seizure operations by the prosecution. While this happens several times a year, he has not been indicted in recent years. Most cases end with him being questioned as a witness. This is partly due to legal precedents that have made it difficult to indict "money suppliers."
However, there is a view that the second trial of the Deutsch Motors stock manipulation case, which involves First Lady Kim Keon-hee, could be a "turning point" in this trend. In the appellate trial for the Deutsch Motors case, the court found an individual named Mr. Sohn, who acted as a money supplier, guilty of aiding and abetting stock manipulation. While the media is speculating whether First Lady Kim Keon-hee could also be indicted, the investment industry is forecasting that prosecutions of "money suppliers" may increase.
Appellate court finds 'aiding and abetting' guilty in Deutsch Motors case
During the appellate proceedings for the Deutsch Motors stock manipulation case, the prosecution added a charge of "aiding and abetting" to the suspicions against the money supplier, Mr. Sohn. The court found him guilty, reasoning that "even without specific knowledge of the principal offender’s crime, aiding and abetting can be established through oblique intent or foresight."
Mr. Sohn traded stocks throughout all five phases of the manipulation that took place over three years, from December 2009 to December 2012. He began trading directly after being introduced to a stock manipulation "player" named Mr. Kim. The method involved Mr. Sohn buying and selling stocks himself, based on insider information obtained through the manipulation team.
The court viewed this as "not being a co-conspirator, but falling under aiding and abetting." In the first trial, the court had found Mr. Sohn "not guilty" when the prosecution charged him as a "co-conspirator," but when the charge of aiding and abetting was added, the court recognized it. The appellate court cited a Supreme Court precedent as the basis for this. It was a case where individuals who provided funds and borrowed-name accounts while aware that a principal offender was acquiring a company under a borrowed name were found guilty of aiding and abetting.
The second-trial court stated, "He was not a mere money supplier; he purchased large quantities of stock with the intention to assist, thereby facilitating the stock manipulation," and sentenced Mr. Sohn to six months in prison, suspended for one year. The ruling cited as evidence the statement made by stock manipulation player Mr. Kim, who said, "Mr. Sohn was also aware that I was managing the Deutsch Motors stock price upon request from former Chairman Kwon."
Is the official stance of not indicting 'money suppliers' changing?
In the past, even though money suppliers invested while clearly knowing about the attempted stock manipulation, they were not even indicted because courts often ruled they were not accomplices. This is why this trial is being described as a potential turning point.
However, there are cautious predictions that one must wait to see how the direction of future prosecutorial investigations changes. Generally, money suppliers avoid being labeled as accomplices by participating as "1/N investors" in private equity funds (PEFs) or investment vehicles led by stock manipulation players, or by investing in convertible bonds (CB) and bonds with warrants (BW) issued by listed companies.
While Mr. Sohn traded stocks directly in his case, it could be more difficult for the prosecution to prove that an investor knew about stock manipulation when participating through CBs or BWs, as these are typically disposed of once the stock is listed in the future.
Since manipulation-prone companies usually pump up their stock prices under the pretext of positive news, such as "entering a new business," money suppliers often testify that they "expected the stock to rise but didn't know it was manipulation." Analysts suggest that the prosecution will only be able to secure convictions for "aiding and abetting" if they present clear evidence, such as testimony from key figures that goes beyond simple denials.
An official in the investment industry noted, "Because stock manipulation players have to return to manipulating stocks after being punished once, it may not be easy for them to testify about the conspiracy or abetting of money suppliers." However, they added, "As sentencing guidelines have become stricter these days, much of that 'loyalty' has disappeared, so there may be cases where they provide active testimony to avoid harsher punishment."
Meanwhile, the judgment also included the fact that Kim Man-bae, a major shareholder of Hwacheon Daeyu involved in the Daejang-dong development scandal, threatened former Chairman Kwon while he was working for a media outlet, saying he would "expose the truth about the stock manipulation." It was revealed that after the relationship between former Chairman Kwon and the first-phase stock manipulation player, Mr. Lee, soured over profit-sharing issues around May 2011, Mr. Lee used Mr. Kim to tell former Chairman Kwon, while mentioning the exposure of the stock manipulation, to "settle all debts and credits with Mr. Lee, or else you'll be wearing silver bracelets (handcuffs)." At the time, Mr. Kim did not write a related article.