An individual investor who targeted thinly traded stocks and placed market manipulation orders almost daily for a year to gain approximately 30 million won ($22,000) in illegal profits has been caught by financial authorities.
The Securities and Futures Commission announced Wednesday that it had referred an individual investor to prosecutors for allegedly violating the Capital Markets Act's prohibition on market manipulation by artificially inflating stock prices to reap illicit gains.
According to the Financial Services Commission's investigation, individual investor Mr. A submitted a total of 5,042 manipulation orders over approximately one year from March 21, 2017 to April 30, 2018 to profit from price increases in Company C's stock. Mr. A mobilized 13 accounts belonging to five parties, including himself, family members, and his own company B, to execute the manipulation scheme.
Company C's stock, which Mr. A targeted, was found to be vulnerable to manipulation orders due to its low trading volume. Mr. A placed manipulation orders almost daily and even took out stock-backed loans using Company C shares as collateral, then repaid the loans while buying and selling the same stock.
Even before executing the manipulation scheme, Mr. A had received multiple warnings from securities firms regarding unfair trading practices, including verbal warnings, written warnings, advance notice of trading restrictions, and actual trading bans, but ignored them all. Despite receiving trading restrictions eight times, Mr. A moved between multiple brokerages and alternated between accounts registered under other people's names.
Market manipulation intended to create a false impression that securities trading is active or to cause others to make erroneous judgments can result in criminal penalties under the Capital Markets Act, including imprisonment of one year or more or fines. Using borrowed-name accounts for unfair trading purposes can also result in criminal penalties under the Financial Real Name Act, including imprisonment of up to five years or fines of up to 50 million won.
"We will continue to closely monitor unfair trading practices to ensure fairness in capital markets and protect investor confidence, and we will thoroughly investigate and take strict action against detected violations to establish order in capital market transactions," an FSC official said. "We urge the public to actively report any suspected unfair trading activities in capital markets."