An incumbent reporter and a certified public accountant colluded to front-run by using articles on standout stocks, and authorities uncovered the scheme. Financial regulators referred seven people involved to prosecutors.
The Financial Supervisory Service special judicial police for the capital market said on the 18th that it sent seven people, including ringleader A of a stock-manipulation ring and incumbent reporter B, two of whom are in custody, to prosecutors with an opinion to indict them on charges of violating the Financial Investment Services and Capital Markets Act.
According to the Financial Supervisory Service (FSS), A, a certified public accountant, formed a stock-manipulation organization with three incumbent reporters around Oct. 2020 and carried out front-running by using articles on standout stocks.
They targeted small and mid-cap stocks with low trading volume or high volatility, bought shares before publication, and sold them after the articles ran if the prices rose, it was found.
A drafted the initial versions of standout-stock articles and passed them to the reporters in the group, and the reporters sent the stories at prearranged times. The manipulation ring used their own and borrowed-name accounts to buy shares in advance and then placed sell orders timed to the article release to realize gains.
The Financial Supervisory Service (FSS) found that A's group recruited multiple newsroom reporters by offering cash and other benefits and used about 1,800 articles through June last year to obtain 8.56 billion won in illicit gains.
A separate front-running case by incumbent reporter B was also uncovered. B is suspected of using about 300 standout-stock articles from Oct. 2022 to July last year to take 750 million won in illicit gains.
B was found to have traded by buying related stocks in advance through accounts in B's own name and borrowed names, sending out articles B wrote, and selling when prices rose. B allegedly exploited direct control over article distribution rights to publish at desired times.
The Financial Supervisory Service (FSS) found that B's average illicit gain per case was about 2 million won, with a maximum gain of 38.23 million won.
The Financial Supervisory Service (FSS) special judicial police and the investigation bureau said, "We will continue to monitor acts that undermine fair trading order in the capital market and harm ordinary investors, like this front-running case involving reporters, and we will conduct strict criminal and administrative investigations when we find violations to help bolster confidence in the capital market."