A former reporter and a full-time investor who made more than 10 billion won in trading gains by buying stocks and then publishing favorable articles were arrested.
On the 23rd, the Financial Supervisory Service said it detained two people — former reporter A and full-time investor B who previously worked at a securities firm — on the 21st on suspicion of violating the Financial Investment Services and Capital Markets Act and referred them to prosecutors with a recommendation to indict.
Earlier this year, the Financial Supervisory Service investigation bureau detected multiple indications that former and current reporters engaged in front-running using "featured stock" articles, and it filed a complaint with the Seoul Southern District Prosecutors' Office after a resolution by the Securities and Futures Commission.
Afterward, the Seoul Southern District Prosecutors' Office, together with the Financial Supervisory Service's Capital Markets Special Judicial Police, conducted a wide-ranging investigation, including searches and seizures of more than 50 locations, including media outlets, and digital forensic analysis.
Former reporter A and full-time investor B, who were detained, are accused of front-running mainly small and mid-cap stocks with low trading volume or high price volatility to reap more than 11.1 billion won in illicit gains.
They would accumulate shares in advance, write articles suggesting there was major good news, and then sell when the price rose, front-running 1,058 stocks over nine years from 2017 to this year.
In particular, they frequently used so-called "featured stock" articles that analyze the reasons when a specific stock surges. They targeted the fact that the less information a small-cap stock has, the more its price swings depending on the article's content.
The Financial Supervisory Service's special judicial police said it plans to investigate other suspects as well. In addition to the two who are detained, investigations are reportedly underway into 15 suspects, including former and current reporters.
The Financial Supervisory Service said, "Even if terms such as 'featured stock,' 'related theme stock,' or 'surging stock' are mentioned, investors need to make decisions carefully by thoroughly checking the target corporations' disclosures and factors behind any price increase."