The Financial Supervisory Service is reviewing the possibility of irregular transactions while investigating allegations of stock price manipulation involving SAMBU Construction.
Irregular transactions are one of the three major unfair trading practices, along with price manipulation and insider trading. This was the charge against the Shincorp Group, which claimed it would salvage the treasure ship Donetsk containing gold bullion seven years ago. At that time, the Shincorp Group was found to have not verified the treasure, and even if there were treasures on the ship, it became evident that there were no funds for salvaging, leading to prison sentences for those involved.
The rise in SAMBU Construction's stock price began when it signed a memorandum of understanding (MOU) related to reconstruction projects in a city in Ukraine. If the company used this MOU as a tool to inflate its stock price without the will or ability to fulfill its contents, SAMBU Construction is likely to face a fate similar to that of the Shincorp Group.
According to financial authorities on the 12th, the FSS is investigating the reality of the projects that SAMBU Construction has pursued to determine the allegations of irregular trading violations. Irregular trading prohibited in the capital market includes acts that use ▲ dishonest means, plans, or tricks ▲ false statements regarding important matters ▲ false price manipulation ▲ spreading rumors for the purpose of price fluctuation.
Those who engage in irregular transactions shall face a prison sentence of more than one year or a fine of 4 to 6 times the profits gained from the violation. If the profit amount exceeds 5 billion won, it could lead to a life sentence or imprisonment of 5 years or more.
Earlier, SAMBU Construction announced on May 23, 2023, that it signed a comprehensive MOU related to reconstruction projects with Konotop, a city in northeastern Ukraine, during the Ukraine Global Reconstruction Forum held in Poland. As a result, the company was classified as a reconstruction leader in Ukraine, and its stock price, which had remained around 1,000 won, skyrocketed to 5,500 won within two months.
However, more than a year has passed since the MOU was signed, and no projects have progressed. Recently (in the third quarter of last year), SAMBU Construction stated in its quarterly report that "there are currently no ongoing (overseas) projects, and local overseas corporations are in a dormant state, undergoing liquidation procedures." SAMBU Construction's overseas business segment sales, which were around 300 million won when the MOU was signed, dropped to 0 won in the first to third quarters of last year. Despite being categorized as a Ukrainian reconstruction theme stock, there were no significant projects.
To prove irregular trading, it is necessary to further investigate whether the MOU was planned to inflate the stock price or if it was unable to proceed due to external factors. If it is due to conditions beyond the company's control, such as the protracted war between Russia and Ukraine, SAMBU Construction's liability will decrease. Therefore, the FSS analyzes the company's willingness and ability to carry out its work during such investigations.
If it is concluded that there was no willingness or ability, the FSS will refer the relevant information to the prosecution to find clear evidence. Unlike the FSS, the prosecution has enforcement powers such as conducting searches and mobile phone forensics.
The Democratic Party of Korea asserts that this allegation is related to diplomacy and defense policy. The problematic Ukraine forum was attended by then-Minister of Land, Infrastructure and Transport Won Hee-ryong. Additionally, Lee Jong-ho, former CEO of Black Pearl Investment, sent a message in a KakaoTalk group chat with friends from the Marine Corps on May 14 of the same year, stating, "Check SAMBU tomorrow." This former CEO has a history of being punished for manipulating the stock price of Deutsch Motors and is an account manager for Kim Keon-hee.
Two days after Lee sent the aforementioned message, Kim met with the wife of the President of Ukraine during her visit to Korea. The next day, then Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho signed a memorandum of understanding to support funding for Ukraine.
In addition, it is expected to investigate who benefited from the surge in stock prices. The FSS reports that major shareholders and stakeholders of SAMBU Construction made a profit of 11 billion won due to the skyrocketing stock price.
As allegations have arisen regarding the involvement of the former CEO, the investigation is currently examining over 200 accounts that realized profits from SAMBU Construction during the period suspected of irregular trading, under the assumption that the major shareholder and stakeholders may have shared profits with him. The FSS plans to complete the investigation soon and decide whether to refer the matter to the prosecution.