Defendant

Kim Jong-chul (prosecution), Kim Jin-ho, and Cho Young-hee (Trial)

Attorney Park Ji-ok

A defendant shall be punished by imprisonment for one year.

except that the execution of the above punishment shall be suspended for two years from the date this judgment becomes final and conclusive.

29,462,402 won shall be additionally collected from the defendant.

Around August 19, 2005, the Defendant established a non-indicted 7 social welfare foundation and actually operated the said foundation. On September 19, 201, the Defendant was appointed as the representative director of the said foundation. From February 18, 2010 to September 26, 2008, the representative director of the non-indicted 8 foundation, the representative director of the non-indicted 9 foundation from September 26, 2008, and the representative director of the non-indicted 10 foundation from February 4, 2008 to the non-indicted 10 foundation exercise de facto influence over the important management affairs of the said foundation.

1. Violation of duty not to use material nonpublic information;

No person who concludes or negotiates a contract with a listed corporation and becomes aware of material nonpublic information (referring to information that may have a significant impact on investors' judgment on investment and that has not yet been disclosed to an unspecified number of unspecified persons in a manner prescribed by Presidential Decree) in the course of conclusion, negotiation, or execution of the contract shall use any material nonpublic information related to the business, etc. of the listed corporation in the trading or any other transaction of specific securities, etc. or allow another

Nonindicted Co. 1 (hereinafter “Nonindicted Co. 1”) changed its trade name to “○○○○○○,” on July 22, 2013; hereinafter “Nonindicted Co. 1”) is a KOSDAQ-listed corporation that mainly engages in the development of cell therapy using stem cells as its main business. Nonindicted Co. 1 received a claim for early repayment of KRW 15 billion from Nonindicted Co. 3, a person who acquired bonds with warrants at the fifth time on February 8, 201, claiming early reimbursement of KRW 15 billion from Nonindicted Co. 3, a person who acquired bonds with warrants at the fifth time on February 8, 201, and promoted the issuance of bonds with warrants on a large scale due to the net loss of KRW 28.2 billion per quarter in 2010 and the net loss of KRW 1 billion per quarter in 2011.

(a) Using information on the initial issuance of bonds with warrants;

On May 24, 2011, the Defendant was undergoing blood tests for stem cell procedures at the cooperative hospital for Nonindicted Company 1 located in Gangnam-gu Seoul Metropolitan Government, and was solicited Nonindicted Company 1 to make an investment in Nonindicted Company 1 by Nonindicted 11. Around that time, Nonindicted 12 and Nonindicted 13, a person in charge of issuing bonds with warrants of Nonindicted Company 1, were solicited to accept bonds with warrants. Thereafter, on May 29, 2011, the Defendant discussed Nonindicted 1’s business name at the coffee shop in Yeongdeungpo-gu Seoul Metropolitan Government, where it is difficult to identify, and then, on June 2, 2011, the Defendant concluded a contract to accept KRW 10 billion of the bonds with warrants of Nonindicted Company 1’s issuance nine times of the bonds with warrants of Nonindicted Company 1, and on June 13, 2011, publicly announced the “decision to issue bonds with warrants” of KRW 100 billion.

As above, on May 29, 201, the Defendant knew that “the Defendant, the former president of Nonindicted Company 2, takes over KRW 10 billion with Nonindicted Company 1’s bonds with warrant” in negotiating an underwriting contract with Nonindicted Company 1, and acquired KRW 50,000 of the shares of Nonindicted Company 1 from the △ Investment Department account in the name of the Defendant on May 30, 201, prior to disclosure of the information, using the above material nonpublic information, and thereafter purchased KRW 106,065,00 of the shares of Nonindicted Company 1’s 50,00 from the △ Investment Unit account in the name of the Defendant, and thereafter, acquired the unjust enrichment of KRW 106,00 from June 2, 2011 through the Defendant, Nonindicted Incorporated Foundation 7, Nonindicted Incorporated Foundation 14, the Defendant’s children, and Nonindicted Party 15’s account in total 943,157,400 won.

Accordingly, the Defendant, who is negotiating the conclusion of the contract with Nonindicted Company 1, used material non-indicted 1’s business information related to the business of Nonindicted Company 1, which was known in the course of negotiating the contract.

(b) Use of ten-time information on issuance of bonds with warrants;

On July 7, 2011, the Defendant agreed with Nonindicted 4 on the terms and conditions for the issuance of the bonds with warrants worth KRW 20 billion as a proposal for the issuance thereof. On July 7, 2011, at the meeting of the finance subcommittee of Nonindicted 7 Social Welfare Foundation, the Defendant decided to acquire the bonds with warrants of Nonindicted 1 and subsequently negotiated with Nonindicted 12. On July 21, 201, the Defendant entered into a contract with Nonindicted 7 Social Welfare Foundation to acquire the bonds with warrants of KRW 20 billion, including KRW 10 billion, KRW 7 billion, KRW 16 of the Defendant’s wife, KRW 2 billion, and KRW 1 billion, KRW 20 billion, and KRW 1 billion, and Nonindicted 1 Company publicly announced the “decision to issue the bonds with warrants of KRW 21 billion” on July 21, 201.

As above, the Defendant negotiated the underwriting contract with Nonindicted Company 1 on July 7, 2011, and acquired unjust enrichment of KRW 244,883,100 by purchasing KRW 5,000 of the shares of Nonindicted Company 1 from Nonindicted Company 14 at KRW 27,850,00 on July 20, 201, using the above material non-indicted 14, prior to disclosure of the information, at KRW 6,072,168,60, the sum of KRW 1,148,810 of the shares of Nonindicted Company 1 through the account of Nonindicted Company 7, Social Welfare Foundation, and Nonindicted Company 14, as shown in attached Table 2, until July 21, 2011.

Accordingly, the Defendant, who is negotiating the conclusion of the contract with Nonindicted Company 1, used material non-indicted 1’s business information related to the business of Nonindicted Company 1, which was known in the course of negotiating the contract.

2. Violation of duty to report on stocks, etc. held in bulk;

A person who holds stocks, etc. of a stock-listed corporation (referring to cases where the total number of stocks, etc. held by the person himself/herself and his/her specially related persons is at least 5/100 of the total number of such stocks, etc.) shall report the status of holding, the purpose of holding, the major terms and conditions of the contract on the stocks, etc. held by him/her, etc. to the Financial Services Commission and the Exchange within five days from the date of such change. In addition, where the total number of stocks, etc. held by him/her has changed by at least 1/100 of the total number of such stocks, etc., he/she shall report the change to the Financial Services Commission

A. Nonindicted Company 1

Around June 14, 2011, the Defendant owned 3,739,230 shares of Nonindicted Company 1, and held 4,239,00 shares of Nonindicted Company 1 by combining the shares of Nonindicted Company 1 owned by Nonindicted Company 1, Nonindicted 15, Nonindicted 7, and the judgment of the lower court (Nonindicted 7, Nonindicted Incorporated Foundation 8, Nonindicted Incorporated Foundation 9, and Nonindicted Incorporated Foundation 10), which are related parties to the Defendant, with a total of 4,239,920 shares by holding the shares of Nonindicted Company 1, which are owned by the directors. The sum of shares shares of Nonindicted Company 1 reaches 5.05%.

As a result, the Defendant violated the obligation to report possession of stocks held by the stock-listed corporation three times in total, including not reporting the status of holding stocks to the Financial Services Commission and the Exchange within five days, even though the stocks held by the stock-listed corporation were held in bulk.

B. Nonindicted Co. 17

On July 14, 2011, the Defendant owned 1,287,499 shares of Nonindicted Co. 17 Company, and held 1,288,99 shares of Nonindicted Co. 17 Company owned by the directors of the said four corporations, who are specially related persons, together with the shares of Nonindicted Co. 17 Company. The total share ratio in Nonindicted Co. 17 exceeded 5.27%.

Accordingly, the Defendant violated the duty to report possession of stocks held by the stock-listed corporation three times in total as shown in the attached Table 4, including failure to report the status of holding stocks, etc. to the Financial Services Commission and the Exchange within five days even though the stocks held by the stock-listed

C. Nonindicted Co. 18

Around April 18, 2011, the Defendant owned 274,30 shares of Nonindicted Co. 18, and owned a total of 397,475 shares of Nonindicted Co. 18 by combining the shares of Nonindicted Co. 14, 15, Nonindicted Co. 10, Nonindicted Co. 10, Nonindicted Co. 9, Nonindicted Co. 9, and the shares of Nonindicted Co. 18, which are owned by the directors of the said four corporations, which were owned by the Defendant who was a specially related person, to reach 5.09% in total.

Accordingly, the Defendant violated the duty to report possession of stocks held by the stock-listed corporation on 10 occasions in total, as shown in the attached Table 5, including the failure to report the status of holding stocks, etc. to the Financial Services Commission and the Exchange within five days after holding stocks, etc.

1. Partial statement of the defendant;

1. The prosecutor’s statement on Nonindicted 19

1. Each written answer from Nonindicted 12, Nonindicted 13, Nonindicted 20, and Nonindicted 21 (Evidence List Nos. 36, 37, 38, 46, 47, 62, and 63)

1. Each written statement of Nonindicted 22, Nonindicted 23, Nonindicted 24, Nonindicted 25, Nonindicted 26, Nonindicted 27, Nonindicted 28, Nonindicted 29, and Nonindicted 30

1. A vindication of questions related to the holding and management of each share;

1. The outcome and processing of the investigation of unfair trading of three shares, including Nonindicted Company 1

1. Investigation into Nonindicted 17 and Nonindicted 18 Company

1. Two copies of the minutes of the finance subcommittee;

1. Full certificate of each to be registered (as evidence list Nos. 2 and 3);

1. Inquiry about details of transactions of △△ Bank;

1. Article relevant to the facts constituting an offense and the selection of punishment;

Articles 443(1)1, 174(1)4(a) of the former Financial Investment Services and Capital Markets Act (amended by Act No. 11845, May 28, 2013; hereinafter “former Financial Investment Services and Capital Markets Act”); Articles 445(20 and 147(1) of the former Financial Investment Services and Capital Markets Act (amended by Act No. 11845, May 28, 201; hereinafter “former Financial Investment Services and Capital Markets Act”); Articles 443(1)1, 174(1)4(a)2

1. Aggravation for concurrent crimes;

Article 37 (former part), Article 38 (1) 2, and Article 50 of the Criminal Act

1. Suspension of execution;

Article 62(1) of the Criminal Act (Consideration favorable Circumstances among the Reasons for Sentencing below)

1. Additional collection:

Articles 10(1) and 8(1)1 of the Act on Regulation and Punishment of Criminal Proceeds Concealment

1. Chief;

A. Information that “the Defendant, the president of the former Nonindicted Company 2, acquires bonds with warrants issued by Nonindicted Company 1” does not constitute “material nonpublic information” under Article 174(1) of the former Capital Markets Act.

B. The information that “the Defendant, the president of the former Nonindicted Company 2, acquires bonds with warrants with Nonindicted Company 1” is determined and created according to the intention of the Defendant’s internal deliberation, and thus, not information related to Nonindicted Company 1’s “business, etc.” but cannot be deemed as internal information that the Defendant knew in the process of concluding, negotiating, or implementing the contract with Nonindicted Company 1.

C. The Defendant merely purchased shares under the judgment that the shares of Nonindicted Company 1 were low, separate from the subscription to bonds with warrants issued by Nonindicted Company 1, and did not have any reason to make a stock investment in the course of committing a tort. Thus, the above purchase of shares cannot be deemed as “use” of material nonpublic information.

2. Determination:

A. The assertion that the “material nonpublic information” is not “material nonpublic information” under the former Capital Markets Act

Article 174(1) of the former Financial Investment Services and Capital Markets Act provides that “Any material nonpublic information that may have a significant impact on investors’ investment judgment and that has yet to be disclosed to the public in such a manner as prescribed by Presidential Decree.” In such cases, “information that may have a significant impact on investors’ investment judgment” refers to any information that a reasonable investor considers as having a material value in making a decision on the transaction of securities when it is compared and determined by comparing and assessing the importance of the information and the probability of the occurrence of the information, among the facts that may have a significant impact on investors’ management and property (see, e.g., Supreme Court Decision 2007Do9769, May 13, 2010).

In light of the following circumstances acknowledged by the evidence adopted and examined by this court: (a) around February 8, 201, Nonindicted Co. 1 was under pressure by receiving a request for early redemption of the bonds from Nonindicted Co. 3; (b) Nonindicted Co. 1 could expect the effect of resolving such financial difficulties if the funds are raised through the issuance of the bonds with warrants; (c) the amount of Nonindicted Co. 1’s bonds with warrants was 10 billion won and 20 billion won, respectively; and (d) some directors, etc. of the said four corporations operated by the Defendant (Nonindicted Co. 23, 28, 20, and 21) stated to the effect that the Defendant purchased the stocks of Nonindicted Co. 1 by acquiring the bonds with warrants from Nonindicted Co. 1, the information that Nonindicted Co. 1 acquired the bonds with warrants constitutes an “material nonpublic information” under Article 174(1) of the former Capital Markets Act.

Therefore, we cannot accept the above argument of the defendant and his defense counsel.

B. The assertion that the information was not known as “related to the business, etc.”

Article 174(1) of the former Financial Investment Services and Capital Markets Act prohibits the use of material nonpublic information related to the business, etc. of a listed corporation. Thus, even if such information constitutes material nonpublic information, business relevance should be recognized. Moreover, Article 174(1)4 of the said Act prohibits the use of material nonpublic information in the course of concluding, negotiating, or implementing the relevant contract as a person who is entering into or negotiating a contract with a listed corporation.

In light of the language and text of the former Capital Markets Act and the legislative intent of the former Capital Markets Act, it is reasonable to interpret that the instant material nonpublic information constitutes information related to Non-Indicted Company 1’s business, and that it includes not only information already generated but also information already generated and known in the process of creating such information actively or jointly in the process of creating such information. Thus, the instant material non-public information should be deemed information that the Defendant was aware of participating in the process of creating such information based on the special status as a contracting party in the process of concluding and negotiating the underwriting contract for bonds with warrants.

Therefore, we cannot accept the above argument of the defendant and his defense counsel.

C. The assertion that the material nonpublic information was not “used”

The use of material nonpublic information does not distinguish any limitation or distinction between its own account for the purpose of pursuing its own interest or for another person’s interest, such as a disposition of treasury stocks that will accrue to the pertinent corporation’s interest (see, e.g., Supreme Court Decision 2009Do1374, Jul. 9, 2009). In addition, in trading securities with the knowledge of material nonpublic information, the information may be deemed to have used the information if it had an impact on the determination of trading terms, such as whether to trade the securities, the time of the transaction, the transaction volume, and the price, and if the information was traded with the knowledge of material nonpublic information, it shall be deemed to have been traded with the information, barring special circumstances.

In light of the aforementioned legal principles, the Defendant purchased Nonindicted Company 1’s shares at all before May 27, 201, and the Defendant purchased Nonindicted Company 1’s shares with the accounts of the Defendant and Nonindicted Incorporated Foundation 7 before the 9th decision to issue warrant bonds was made, respectively, with the aggregate of 98,560 shares on May 30, 201, and the aggregate of 284,120 shares on May 31, 201. This amounted to 14.6% of the trading volume of each corresponding day, and 29.9% of the trading volume. From July 20, 2011 to July 21, 201, it is reasonable to view that Nonindicted Company 1 purchased Nonindicted Company 1’s shares with the account of Nonindicted Incorporated Foundation 1’s 600,000 won prior to the public announcement of the 10th decision to issue warrant bonds, and that Nonindicted Company 1 was also aware of the need for public announcement of the above shares.

Therefore, we cannot accept the above argument of the defendant and his defense counsel.

1. The scope of punishment by law: Imprisonment for not less than one month but not more than 15 years;

2. Scope of recommended sentences according to the sentencing criteria;

(a) Basic crime: A violation of the Financial Investment Services and Capital Markets Act due to the use of material nonpublic information;

[Type of Crime] The Securities and Financial Crime Group The Securities and Financial Crime Group

【Special Convicted Person】

[Scope of Recommendation] Imprisonment of not less than one year but not more than four years (Basic Area)

(b) Additional crimes: Violation of the Financial Investment Services and Capital Markets Act due to the violation of each duty to report;

[Types of Crimes] Violation of the duty to disclose stocks, etc. (Type 1) in possession of stocks, etc. in violation of transparency in the capital market>

【Special Convicted Person】

[Scope of Recommendation] Imprisonment of not less than four months but not more than one year (Basic Area)

(c) Criteria for handling multiple crimes;

[Scope of Recommendation] Imprisonment with prison labor for not less than one year but not more than four years and not more than ten months (based on the upper basis of calculation: 4 years, the upper limit of the recommendation for basic crimes + 6 months, 1/2 of the upper limit of the recommendation for additional crimes + 1/3 of the upper limit of the recommendation for additional crimes

3. Determination of sentence: Imprisonment with prison labor for one year and two years; and

As to the instant crime, the use of material nonpublic information related to the sale and purchase or any other transaction of securities, such as the instant crime, undermining the corporate disclosure system, undermining the transparency and soundness of the corporate operation and securities trading market, undermining ordinary investors such as shareholders, etc., resulting in unexpected damages to shareholders, etc., thereby impairing the foundation of the market economy order. The Defendant, even though he is responsible for faithfully performing the various reporting obligations under the Capital Markets Act in the process of acquiring stocks, shall be taken into account into account the circumstances unfavorable to the Defendant, such as the Defendant’s violation of such obligations. A favorable consideration is given to the Defendant

The punishment shall be determined as ordered in consideration of all the sentencing conditions shown in the pleadings of this case, such as the age, character and conduct, environment, family relationship, circumstances after the crime, etc. of the defendant.

1. Summary of the facts charged

On May 24, 2011, the Defendant, while negotiating an underwriting contract with Nonindicted Company 1 on and around May 27, 201, knew material nonpublic information as stated in Section 1-A of the criminal facts stated in the judgment, and purchased KRW 16,020 shares of Nonindicted Company 1 from the △△ Investment Unit account in the name of the Defendant at KRW 33,802,20, which was before such information was disclosed, using the material nonpublic information, and thereafter purchased KRW 464,400 shares of Nonindicted Company 1 until June 2, 2011, purchased KRW 976,959,600 in total and purchased KRW 18,732,701 as a person who was negotiating the conclusion of the contract with Nonindicted Company 1 and purchased the material nonpublic information acquired in the course of negotiating the contract.

2. Determination:

According to the aforementioned evidence, it is recognized that the Defendant was recommended to acquire Nonindicted 12 and Nonindicted 13, who was a person in charge of issuing Nonindicted Company 1’s bonds with warrant among May 201, and that the Defendant purchased Nonindicted Company 1’s stocks through an account in the name of the Defendant on May 27, 2011.

However, the following circumstances revealed from the evidence adopted and examined by this court, i.e., at the time of delivery with Nonindicted 12, etc., the Defendant did not have determined the specific contents and conditions regarding the acceptance of the bonds with warrants, and the Defendant’s solicitation to acquire the bonds with warrants is difficult to deem that he immediately decided to acquire large amount of bonds with warrants (the Nonindicted 12, etc. appears to have arranged for the Defendant and Nonindicted 1’s Chairperson, the Chairperson of the Nonindicted Company 1), and the Defendant appears to have decided to acquire the bonds with warrants only after hearing the explanation about the status of Nonindicted 4 and Nonindicted 1’s company 1, and discussed about the acceptance of the bonds with warrants. In light of Nonindicted 12-2’s statement, it appears that the Defendant purchased the bonds with warrants from Nonindicted 4 and Nonindicted 1, and there appears to have been no other material evidence to acknowledge that the Defendant purchased the stocks with warrant from Nonindicted 12, 201, based on the material non-Indicted 5’s statement that the Defendant purchased the stocks from Nonindicted 215.

3. Conclusion

Therefore, this part of the facts charged should be pronounced not guilty under the latter part of Article 325 of the Criminal Procedure Act because it constitutes a case where there is no proof of crime. However, as long as it is found guilty of violation of the Financial Investment Services and Capital Markets Act as stated in Article 1-A of the facts charged in relation to such a crime,

[Attachment Omission]

Judges Park Jong-ok (Presiding Judge)