LS Securities(078020) executed stock orders via a fake email and ended up in a legal dispute with a foreign investor. The investor filed a damages claim, saying lax identity verification procedures led to tens of billions of won in losses, while LS Securities said it followed relevant procedures and would fulfill its obligations if responsibility is clearly identified through the investigation results.
On the 24th, according to reporting compiled by ChosunBiz, a foreign investor identified as A filed a damages lawsuit against LS Securities with the Seoul Southern District Court on the 15th for 7,018,670,000 won. A said LS Securities accepted a third party's orders unrelated to the investor's intent, sold the asset, remitted the sale proceeds, and failed to restore the original state despite requests, causing losses.
According to A, from July 2025 to Feb. 2026, a third party impersonated A and instructed stock sales and fund remittances by email. LS Securities placed the orders in its capacity as a standing agent for the foreign investor. A standing agent is a system that handles procedures such as investment registration, account opening, and exercising rights on behalf of a foreigner residing overseas when making domestic stock transactions.
A and LS Securities are sharply divided over the lawsuit. The key issues are who was responsible for verifying the authenticity of the email orders and whether identity verification obligations were met during the ordering and remittance process.
First, A argues the incident occurred because LS Securities failed to properly verify the email address. The scammer impersonating A placed orders using an email address similar to the one listed in the standing agent contract but with a different domain. Even so, A says, LS Securities did not conduct identity verification through the registered email or by phone.
One reason cited for LS Securities missing this was that prior email conversations were attached. LS Securities said that when it "replied" to an email that arrived under A's name, the response was actually sent to the similar email address, and it judged the sender to be the same person given the inclusion of prior order details and the similar addresses. A's side counters that even if prior exchanges were attached, additional verification was needed because the email address itself was different.
Both sides agree the email was hacked, but they differ on whose side was compromised. LS Securities says a Financial Security Institute inspection found no evidence that the company's systems or email were hacked. A's side argues the scammer hacked an LS Securities employee's email account to obtain existing email content and used it to create impersonation emails.
The remittance process is also a key issue. Following the email orders, LS Securities sent about $3.33 million (about 4.9 billion won) in a total of 19 transfers to accounts in the United States and Vietnam. A's side says the crime exploited the fact that in the United States and Vietnam, transfers can be completed even if the recipient name and the actual account holder name differ. The remittance instruction listed A as the recipient, but the actual account number belonged to an account controlled by a third party.
LS Securities, however, said it judged the transactions normal based on the submitted remittance instructions and related documents at the time. It said the standing agent contract does not require designating a pre-registered account and the customer account information was not separately listed in the contract, so it complied with the remittance requests received by email. The brokerage also explained that it only forwards the standing agent contract, remittance instructions, and a passport copy to the transacting bank, while the bank conducts the actual verification of overseas accounts and executes the remittances.
After the problem surfaced, A requested restoration of the improperly sold stocks and remitted asset, but LS Securities did not accept the request. On this, LS Securities said, "We did not refuse to return the original asset; if the court's ruling or other objective means clearly identify responsibility, we will fulfill the corresponding responsibility."
LS Securities says it will do its best to get to the bottom of the matter, viewing it as a third-party criminal case. Immediately after the incident, in Feb. 2026, LS Securities reported the financial incident to the Financial Supervisory Service and filed a criminal complaint with police in early March.