Illicit profits from unfair trading in South Korea's stock markets averaged 2.4 billion won ($1.7 million) per case last year, up 33.3% from 2024, as fraudulent trading schemes became increasingly sophisticated.
Korea Exchange's Market Oversight Commission reported 98 suspected unfair trading cases to the Financial Services Commission on Sunday.
Insider trading using undisclosed information accounted for 58 cases, or 59.2% of the total. Fraudulent trading followed with 18 cases (18.4%), market manipulation with 16 cases (16.3%), and reporting violations with 6 cases (6.1%).
By market, the Kosdaq accounted for 66 cases, or 67.3% of all suspected violations. The Kospi recorded 28 cases (28.6%) and Konex had 2 cases (2.0%). The number of suspected unfair trading cases on the Kosdaq, where companies tend to have weaker governance structures, was more than double that of the Kospi. Each case involved an average of 16 suspects.
Fraudulent trading cases included 14 involving false or exaggerated disclosures and rumor spreading, 3 related to capital-free mergers and acquisitions, and 1 case of front-running ahead of favorable news coverage.
A common scheme persisted: perpetrators falsely disclosed personal funds as acquisition capital to gain management control, then inflated stock prices using large-scale fundraising and fabricated new business ventures in sectors such as artificial intelligence and secondary batteries before selling their stakes for profit.
Under the guise of new business expansion, some acquired unlisted companies at inflated prices to obscure fund flows. Others resold convertible bonds to related parties below market value to generate losses, then wrote off loans extended to affiliates.
Cases also emerged of stock price manipulation through unverified news reports about overseas market expansion or technology transfer and supply agreements with foreign entities.
Of the insider trading cases, 38 involved favorable information while 25 exploited negative information. Some tender offer employees and agents used insider knowledge through borrowed-name accounts or passed information to acquaintances.
Four cases of fraudulent trading and market manipulation exploited political themes ahead of the presidential election.
The Exchange urged investors to exercise caution regarding stocks surging without fundamental justification, indiscriminate investments based on election-related themes or rumors, unfair trading around management changes at distressed companies, and investments in stocks artificially inflated to avoid delisting.
