An appellate court has ordered Samsung Securities to compensate investors for half of their losses from the "ghost stock" dividends mishap.
According to legal sources on the 28th, the Seoul Central District Court Civil Appeals Division 2-3 (Presiding Judge Ye Ji-hee) ruled, as in the first trial, that "Samsung Securities must pay about 28 million won to Investor A" in a damages suit A filed against Samsung Securities.
In April 2018, while trying to pay employee stock ownership plan dividends, a Samsung Securities staff member mistakenly entered "1,000 shares" instead of "1,000 won per share." As a result, about 2.81 billion shares—worth 112 trillion won at market prices—were erroneously deposited into the accounts of employees holding shares under the plan. This exceeded Samsung Securities' authorized share issuance and was dubbed ghost stock.
Some employees dumped the shares on the market, and the stock price plunged as much as 11.7% intraday. The shares they sold totaled 5.01 million. Once the company moved to assess the situation, they did not pocket the proceeds from selling the shares.
Investor A filed a damages suit in the 60 million won range in June that year, claiming losses from the Samsung Securities dividends mishap. In Sept. 2021, the first trial ordered the company to pay about 28 million won, half the amount. The first trial said, "Samsung Securities caused the incident by failing to establish internal controls for the employee stock ownership plan dividends system."
Samsung Securities appealed, but the appellate court reached the same conclusion. The appellate court said, "Samsung Securities failed to exercise the duty of care as a prudent manager to ensure that electronic financial transactions are processed safely," adding, "It caused the staff dividends input error by failing to establish internal controls for the dividends system."