An appeals court has ordered Samsung Securities to compensate investors who suffered losses from the "ghost stock" dividends error for half of their damages.
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, in a damages suit filed by an investor, identified as A, against Samsung Securities, saying, "Samsung Securities must pay a little over 28 million won to A."
In April 2018, while attempting to pay employee stock ownership plan dividends, Samsung Securities experienced an incident in which a staff member mistakenly entered "1,000 shares" instead of "1,000 won per share." As a result, a little over 2,810,000,000 shares—worth 112 trillion won at market prices—were incorrectly credited to accounts of employees holding shares through the plan. This exceeded Samsung Securities' authorized share issuance limit and was called ghost stock.
Some employees dumped the shares on the market, and the stock fell as much as 11.7% intraday. The shares they sold reached 5.01 million. They did not pocket the proceeds because the company moved to identify the situation.
In June that year, investor A filed a damages suit in the 60 million won range, saying the Samsung Securities dividends incident caused losses. In Sept. 2021, the first-instance court found that the company should pay a little over 28 million won, or half. The court said, "Samsung Securities caused the incident by failing to establish an internal control system for the employee stock ownership plan dividends system."
Samsung Securities appealed, but the appellate court ruled the same way. The appellate court said, "Samsung Securities failed to fulfill its duty of care as a prudent manager to ensure electronic financial transaction processing is safe," adding, "It caused the staff dividends error by failing to establish internal controls for the dividends system."