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Disciplinary measures against 'Donghak Ants Mentor' John Lee

Disciplinary measures against 'Donghak Ants Mentor' John Lee

Posted May. 27, 2023 07:44,   

Updated May. 27, 2023 07:44


The Financial Supervisory Service (FSS) has taken strict disciplinary action against former Meritz Asset Management CEO John Lee for violating the Protection of Financial Consumers Act. These measures include suspending his duties and a fine of 1 billion won. Mr. Lee, a prominent figure in the stock market, earned the nickname "mentor of Donghak ants." During the investigation into the stock price crash caused by Societe Generale (SG) securities, the FSS uncovered substantial evidence indicating that a significant amount of the stocks in question were sold just before the sharp price decline. This series of events is gradually exposing the hidden corruption prevalent in the stock market.

Lee resigned from his position in June last year, following the revelation that he held a 6% stake in a peer-to-peer finance company established by an acquaintance under the name of his wife. Furthermore, he had invested in the company through a private equity fund managed by Meritz Asset Management. However, since the company was not publicly traded, disciplinary measures did not include this matter. Instead, Lee faced the consequences of promoting the company's fund products on his YouTube channel without proper authorization. The Financial Services Commission will determine the severity of the disciplinary measures, which may result in a ban on serving as an executive in the financial sector for a certain period. His downfall was inevitable, given that he had earned the moniker "John Bong-joon" for recommending stock investments and making comments such as, "Buy stocks for your child instead of sending them to a private cram school."

In the aftermath of the John Lee controversy, Meritz Securities, which was previously part of the same group as Meritz Asset Management before its sale to a private equity firm in January, has also come under scrutiny for its questionable activities. On May 11, Ewha Group Chairman Kim Young-jun was arrested on charges of embezzlement and breach of trust. Then, on April 18, Meritz Securities sold all of its shares in Ewha Group affiliate EID, resulting in a profit of 16 billion won. Meanwhile, EID's stock, previously touted as "secondary battery-themed stocks," experienced a significant decline after Kim's arrest and even faced a suspension in trading, causing substantial losses for retail investors.

The Financial Supervisory Service, currently investigating the trading records of eight stocks associated with the SG stock market crash, has uncovered a higher number of abnormal transactions than initially anticipated. It has come to light that a closely related party of an executive at a securities firm allegedly sold a significant volume of the aforementioned stocks before the crash, seemingly indicating foreknowledge of the event. This revelation raises concerns about the possibility that they were the sole beneficiaries who managed to evade losses by utilizing undisclosed information inaccessible to retail investors.

The recent disclosures of moral hazards exhibited by securities firms and asset managers have significantly eroded the integrity of our asset markets. As long as this misconduct persists, aspirations for the growth of our stock market, including inclusion in the Morgan Stanley Capital International (MSCI) Developed Markets Index, will remain unattainable dreams. Financial authorities and prosecutors must diligently pursue and penalize those involved in stock market malpractices that defraud legitimate investors, with no time constraints until the matter is thoroughly resolved.