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South Korea shaken by a resounding financial scandal


A stock market manipulation scandal is pushing South Korea to make financial products called “contracts for difference” (CFDs) more transparent. These contracts aim to “exchange the difference between the current price of an asset (stock, commodity, stock index, etc.) and its price at the time of the contract’s closing”, explains the European Market Authority. They allow you to take advantage of changes in value without having to buy the security in question.

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The revision, announced Monday, May 29 by Kim So-young, vice-chairman of the Financial Services Commission, should allow “clearly identify transaction information, including the identity of genuine investors, and the extent of the risks associated with the liquidation of CFDs”.

The decision follows revelations about Ra Deok-yeon. The director of Hoan Investment Consulting, an undeclared investment consulting company, was indicted with two accomplices on Friday, May 26, for breaching the law on capital markets and that on the repression of concealment of the products of a crime. The three allegedly racked up 730.5 billion won (516 million euros) in illicit profits between May 2019 and April 2023 by manipulating stock prices. They are also suspected of tax evasion.

Special team of investigators

The affair was revealed during the sale, on April 24, of 3,400 CFDs on several securities listed on the Seoul Stock Exchange. These massive disposals were made through SG Securities, a local subsidiary of Société Générale. “Regarding the volatility of a number of South Korean stocks, Societe Generale confirmed that the stock sale transactions were the result of transactions carried out as part of its regular market activities with its clients”reacted a spokesperson for the company, who also refuses to comment on cases handled by the financial authorities.

Anyway, the massive liquidation would have caused the fall in the values ​​of several groups such as the energy giants Samchully, Seoul City Gas or Daesung Holdings, which lost 80% of their capitalization. A total of 8.2 trillion won in market capitalization evaporated in less than a week.

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Several hundred investors, including doctors and celebrities, reportedly suffered losses of around 2 trillion won. Singer Im Chang-jung said his account had grown from 2 billion won to 189 million won in two days. Among these investors was the former special prosecutor Park Yeong-soo, who is also a member of the parliamentary committee on public service ethics and who advised Mr. Ra legally.

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