Illegal stock-tip chat room operators that lured investors with high-priced memberships and generated tens of billions of won in profits before evading taxes have been placed under tax investigation by Korean authorities. Controlling families that siphoned off corporate assets through so-called "tunneling" schemes and firms that profited from stock price manipulation will also face intensive tax probes.
The National Tax Service (NTS) said Thursday it is conducting tax investigations into 31 companies that disrupted stock market order through unfair practices, including illegal stock-tip chat rooms, stock price manipulation and tunneling. The total amount of suspected tax evasion exceeds 2 trillion won ($1.5 billion), with 23 of the firms (eight on the KOSPI and 15 on the KOSDAQ) being listed companies.
The NTS targeted five illegal stock-tip chat room operators that solicited investment funds from inexperienced young investors and the elderly. After gaining reputations through platforms such as YouTube, they approached financially vulnerable groups with come-ons like "recommended stocks surging 300%" and "100% returns guaranteed within three days." Once share prices rose, they sold pre-accumulated shares to members, reaping unjust trading profits. Members' losses from these schemes are estimated at more than 4 billion won.
The NTS estimates the operators' tax evasion exceeds 100 billion won. The agency plans to thoroughly tax the targets by verifying not only the market disruption activities but also all related parties and transactions in the trading process. If violations under the Punishment of Tax Evaders Act, such as destruction of evidence or concealment of assets, are confirmed, the agency plans to file criminal complaints with investigative authorities to pursue criminal prosecution.
The NTS is also investigating suspected tax evasion of about 600 billion won by 11 firms that profited from stock price manipulation and accounting fraud. These firms attracted retail investors with false promotions such as "entry into new businesses" or "imminent listings," then concealed capital gains by selling accumulated shares through paper companies or borrowed-name accounts. Speculators reaped enormous trading gains through convertible bonds, while small investors bore the brunt of the resulting share dumps.
Fifteen firms suspected of tunneling — creating channels within corporate transaction structures to funnel money to controlling families — are also under investigation. The amount of alleged tax evasion reaches 1.5 trillion won.
"We will work to firmly establish the perception that not a single won of profit can be gained through unfair trading in the stock market, and that such practices instead return as a greater tax burden," said An Deok-soo, director of the NTS Investigation Bureau.
