As La Deok-yeon, the key figure in the stock plunge linked to SG Securities, received a sharply reduced sentence of eight years in prison on appeal, the court noted that it could not confirm to whom the gains from price rigging accrued and that the previous investigation was insufficient, reviving the mood around Kiwoom Securities' "Kim Ik-rae risk."
Former DaouKiwoom Group Chairman Kim Ik-rae was not indicted at the time after prosecutors found no charges. However, with the bench publicly mentioning the inadequacy of the previous investigation, the possibility of a reinvestigation is being raised.
The Criminal Division 3 of the Seoul High Court on the 25th sentenced La to eight years in prison, a fine of 146.51 billion won, and a forfeiture of 181.558315857 billion won on charges including violating the Financial Investment Services and Capital Markets Act. Compared with the 25-year prison term handed down in the first trial, it was reduced by 17 years. The amount recognized as price rigging was cut significantly from the first trial.
But the capital markets industry focused more on one remark from the bench than on the sentence reduction itself. The bench made clear that the direct cause of the plunge in eight stocks and to whom the gains from price rigging accrued have not yet been revealed, and that the case was not sufficiently investigated.
In the industry, this one remark by the bench appears likely to directly target former Chairman Kim Ik-rae. Just before the eight stocks plunged, Kim sold Daou Data equity and pocketed a profit. Daou Data is the holding company of Kiwoom Securities and was one of the eight stocks in the SG case.
Although prosecutors did not indict the former chairman at the time, the situation has rekindled the prospect of a reinvestigation after the court publicly pointed out that the investigation was lacking.
Two trading days before the crash, on Apr. 20, 2023, the former chairman sold Daou Data equity through a block deal (after-hours bulk trade) at 43,245 won per share, totaling 60.5 billion won. Afterward, Daou Data shares hit the lower limit for two straight days and plunged 62% in four days to 16,490 won.
La publicly singled out the former chairman as the person behind the stock plunge, saying, "Chairman Kim unloaded equity at the peak and was the main party who crashed the share price."
In response, the former chairman denied the allegations, saying the timing of the block deal "happened to coincide," but resigned as chairman a month after the incident, saying, "As group chairman, I apologize for causing public controversy."
Prosecutors later issued a non-indictment disposition in Jun. last year, saying there was no sign that Kiwoom Securities had passed price rigging information to the former chairman.
The industry is closely watching whether owner risk at Kiwoom Securities will flare up again. The former chairman has already completed succession to his eldest son, Kim Dong-jun, head of Kiwoom Investment and PE, but the Fair Trade Commission still designates the former chairman as the head (same person) of DaouKiwoom Group.
In fact, the former chairman remains the largest shareholder of Daou Data, which controls Daou Technology and Kiwoom Securities. Of Daou Data equity, 31.56% is held by eMoney, a company owned by the former chairman's family, and the former chairman holds 23.01%.
However, it is unclear whether a reinvestigation will actually take place. Because prosecutors have already issued a non-indictment, it will be difficult to move without new evidence or an order from the High Prosecutors' Office to reopen the investigation.
A source in the securities industry noted, "Kiwoom Securities recently received authorization to issue promissory notes from the financial authorities, but if the legal risk of former Chairman Kim Ik-rae resurfaces, market trust in Kiwoom Securities could fall and potentially hurt its business."
A Kiwoom Securities official said, "Because the contracts for difference (CFDs) that La's group used for price rigging are over-the-counter derivatives without a basis for punishment under the Financial Investment Services and Capital Markets Act, it appears the sentence was reduced on appeal," adding, "We do not believe the court viewed the fact that La's group did not take revenue as being related to former Chairman Kim Ik-rae."