CEO Suspected of Stock Fraud Worth $8.4 Mln

Prosecutors yesterday said they have caught a company CEO for manipulating stock prices worth 10 billion won (8.4 million U.S. dollars) on the benchmark KOSPI market.

The suspect allegedly raked in illegal profits of 16 billion won (13.4 million dollars) by doubling his company’s KOSPI-listed stock price by placing fictitious orders.

Prosecutors said he prepared about 21.3 billion won (17.9 million dollars) for speculation and used 70 bank accounts in other people’s names from October 2007 to February last year. His company’s stock value rose and he later sold his shares to make a hefty profit.

A source from the Financial Supervisory Service said, “It is rare to see manipulation of stock prices on such a large scale not on the (tech heavy) KOSDAQ but on the KOSPI, which has mainly large capital stocks.”

Prosecutors said the CEO used a variety of ways to manipulate his company’s stock value. He is known to have placed 1,136 orders at high prices and 57 fictitious orders to draw individual investors to sell stocks, and then placed 118 orders at high prices when the opening and closing prices were set.

He orchestrated transactions of 4.6 million shares of his company this way to raise the price from 1,925 won (1.62 dollars) per share in October 2007 to 4,060 won (3.42 dollars) in February last year.

Along with other small business owners, he drew members of individual investor clubs to his scheme and manipulated stock prices with a computer at a rental home in the western Seoul suburb of Gwangmyeong, Gyeonggi Province.

jjj@donga.com