Prosecutors nab key suspect in stock manipulation case
Ra Deok-yeon, a key suspect in a stock manipulation scheme, speaks during an interview with a local news media outlet on May 1. [YONHAP]
Prosecutors on Tuesday apprehended advisory firm head Ra Deok-yeon, a key suspect in a stock manipulation case that has recently shaken Korean financial markets.
42-year-old Ra was nabbed by prosecutors at his home at around 10:25 a.m., according to a joint investigative team formed by the Seoul Southern District Prosecutors’ Office, Financial Services Commission and Financial Supervisory Service.
The suspect is accused of manipulating stock prices through matched orders along with fellow manipulators, where he received personal information such as phone numbers and securities accounts from investors and traded stocks at a predetermined price.
Over 1,000 investors are believed to have suffered from financial losses in excess of two trillion won ($1.5 million).
The prosecution said it would look into allegations that Ra evaded taxes by receiving investment proceeds as commissions through various entities such as an indoor golf training center and a gallery. He has also allegedly established an investment advisory company and recruited investors without registering the company with financial authorities.
The crew has allegedly received 50 percent of the investment proceeds as commission for trades. But they were able to avoid the authorities’ radar by making creative cash-back transactions using credit cards under investors' names such as by purchasing food worth millions of won at a restaurant they opened.
Some 20 businesses affiliated with Ra so far are believed to have been involved in tax evasion and concealment of proceeds.
The stock manipulation scheme, which involved some high-income investors and public figures such as singer Im Chang-jung, came to light after prices of nine small-cap stocks plummeted on April 24, followed by massive unloading of stocks by Societe Generale Securities the same day.
Prices of nine small-cap stocks, including Kospi’s Seoul City Gas and Samchully, fell drastically that day. These stocks hit the daily limit of minus 30 percent for almost four trading days from April 24. Some 8.2 trillion won of market cap are estimated to have dissolved within four trading days.
Ra and his fellow alleged manipulators are suspected of being involved in the scheme as early as 2019 after setting up an investment advisory firm in March 2019.
Ra’s advisory firm in Gangnam District, southern Seoul was raided on April 27 and a total of 10 people, including Ra himself, were banned from leaving the country by the prosecution the same day. Some 200 cell phones were obtained from the office and are currently under forensic investigation.
The prosecution will seek an official arrest warrant for Ra after an investigation. The joint investigation team on Tuesday afternoon detained two other suspects ? a 40-year-old surnamed Byeon and a 33-year-old former professional golfer surnamed An ? both accused of recruiting and managing high-income investors.
Some 60 investors on Tuesday who claim to be victims filed a lawsuit against Ra and five others for fraud, breach of trust and violation of the Criminal Proceeds Concealment Act.
BY CHO JUNG-WOO [cho.jungwoo1@joongang.co.kr]