Setting up and operating a fraudulent investment website where no actual securities trading takes place, used to carry out stock investment chat-room scams, can be punished not only as fraud but also as a violation of the Capital Markets Act, the Supreme Court has ruled.
The Supreme Court's Second Division, with Justice Kwon Young-jun as the presiding judge, recently overturned a lower court ruling that had acquitted a defendant identified as A of violating the Financial Investment Services and Capital Markets Act (Capital Markets Act). The court sent the case back to the Seoul Southern District Court. A had been indicted on charges including joining and engaging in a criminal organization, fraud, and violating the Capital Markets Act.
A joined an investment fraud criminal organization centered on an unidentified Chinese ringleader and was assigned as a customer center employee. From around April to July 2024, members of the criminal organization opened investment chat rooms on Telegram, recruited investors, told them about promising investment stocks, methods, buying and selling timing, and investment amounts, and induced them to sign up for an investment website the organization had developed. They linked domestic and foreign stock index data in real time on their own fake site and elaborately imitated a securities firm's home trading system (HTS), deceiving victims into believing that actual trading was taking place. Through these methods, A and other members received and embezzled approximately 8.4 billion won from 62 investors under the pretext of investment funds.
The first-instance court found A guilty on all charges and sentenced the defendant to five years in prison. The appellate court, however, acquitted the defendant on some charges, including the Capital Markets Act violation, and reduced the sentence to four years. The appellate court found that "the investment site in question was merely a means to deceive the victims," and that "since no actual trading of securities or exchange-traded derivatives took place between the criminal organization and the victims, it is difficult to recognize it as a financial investment instrument market under the Capital Markets Act."
But the Supreme Court reversed the lower court's judgment. It held that even without actual trading, the crime of operating an unlicensed market is established if the "appearance" of a market is met. The court explained, "Although securities trading did not actually take place on this investment site, which was set up and operated as a means to deceive the victims, there is room to find that it had the appearance such that average market participants with ordinary attentiveness would perceive that such trading was actually taking place." It added, "The lower court's ruling, which found there was no proof of the crime and acquitted the defendant solely on the grounds that trading did not actually take place, erred by misunderstanding the legal principles regarding the establishment of the crime of violating the Capital Markets Act, affecting the judgment."
