2013Gohap131 Violation of the Financial Investment Services and Capital Markets Act

2014 initially 1640 Application for a compensation order

A

Public trial, open-air (public trial), and open-air (public trial)

Attorney B,C

D

May 23, 2014

1. The punishment of the accused shall be four years of imprisonment;

2. 176,917,070 won shall be additionally collected from the Defendant.

3. The request for the remedy order of this case shall be dismissed.

Criminal facts

1. The E-market price manipulation of stocks (hereinafter “E”) ordered the Defendant to manipulate the price of E’s stocks so that they can smoothly raise funds for the allocation of new shares to a third party of E (hereinafter “E”), raise the issue value of new shares offering, and dispose of the shares allocated to the participants in new shares offering among the heads of the shares allocated;

In order to acquire additional unjust enrichment from F due to the increase of share price due to the above price manipulation, the Defendant: (a) received the direction from H - a beneficiary account holder and - a 'Machil account holder' in physical color; (b) agreed to distribute the purchase price generated from the price increase due to E’s price manipulation to five to five; and (c) the Defendant conspired to distribute F to F - at the ratio of three to seven percent in case where F receives 50% of the sales revenue from F.

Accordingly, the Defendant conspireds to gain unfair profits by controlling the market price of J, K, L and E shares, and, from July 23, 2009 to February 12, 2010, the Defendant purchased 2,125,941 shares of E by using 45 shares accounts, including 14 borrowed accounts in the name of 6 persons, including M, which was prepared by the Defendant from July 23, 2009, and sold 2,161,052 shares by selling 2,161,052 shares, and operated the market price using such funds as follows.

(a) Market price manipulation by a conspiracy and the disguised trade;

No one shall sell and purchase securities in collusion with another person to sell and sell the securities at the same price or at an agreed value as he/she sells and purchases them, with intent to mislead another person into putting him/her to make a wrong judgment with regard to the sale and purchase of listed securities, and shall sell and purchase such securities without intent to transfer his/her right in selling and buying such securities. In selling and buying such securities, no one shall do any false act with intent to sell and purchase securities without intent to transfer the right.

Around 09:10:00 on February 9, 2010, the Defendant issued an order to sell KRW 19,000 shares E to KRW 10,650 per share at a place (IP address) where it is impossible to know by means of a securities account (N) in the name of a national St Bank of Korea (IP address). At around 09:10:08 on the same day, J cannot know by means of a securities account (IP address) in the name of the St Bank of Korea (SK) at KRW 10,650 per share after selling the order to purchase KRW 10,00 shares E at KRW 10,650 per share. At around 09:108,000 after selling the order, the Defendant conspired to sell shares at KRW 8,940 per share over KRW 10,650 per share, 551,50 per share, and the Defendant conspired to sell and sell the shares to KRW 150,407 per share.36

(b) Price manipulation based on actual transactions;

No one shall make, independently or in collusion with other persons, transactions in the securities market, creating a false or misleading appearance of active trading or causing a fluctuation in the market price of the securities, with the intention of soliciting the sale and purchase transaction of securities.

(i) high-priced purchase;

Around 14:49:53 on February 2, 2010, the Defendant issued an order to purchase 5,000 shares at a high price of KRW 10,300 per share with the immediately preceding price of KRW 10,300 per 10,000, KRW 1000 per 10,300 per 10,300, KRW 6,585, and KRW 20, KRW 350 per 3,189, and issued an order to purchase 5,00 shares at a high price of KRW 10,30 won per 20,000 per 10,00 won per 10,00 won per 10,000 won per 10,00 won per 10,000 won per 10,000 won per 10,000 won to enter into a sale order, and the Defendant thereafter made an order to purchase 26,361,65,264,265, etc.

2) Order for purchase

At around 12:31:05 on January 28, 2010, the Defendant: (a) purchased KRW 11,500, KRW 500, KRW 11,350, and KRW 11,350, and KRW 10, KRW 550 on KRW 10 on KRW 11,150 on KRW 11,00 on KRW 185,00 on KRW 11,00 on KRW 150 on the immediately preceding price, where the cumulative remaining amount is 23,627; and (b) the Defendant conspireded with the Defendant to purchase KRW 11,00 on KRW 11,00 on KRW 11,00 on a stock with a purchase order to increase the remaining amount; and (c) thereby making it difficult to see that the purchase price had a strong influence on purchase without the intention to purchase at a place (IP address 0).

3) On February 2, 2010, the Defendant issued an order for purchase of E shares at KRW 11,000 per share of KRW 11,300 per share of KRW 11,000 per share of KRW 22,736 in a place (IP address) where it is impossible to know by means of a securities account (N) M in the name of a national server branch of one M (IP address) at one M (IP address (IP address) on February 2, 201, and submitted an order for purchase of KRW 10,300 per share of KRW 10,000 per share of KRW 10,000 per share of the same day, and submitted an order for a paper 92,478 SP order with J, L, and K, and the Defendant issued an order for a paper 97,478 SP order over 16 times in total, as stated in Table 1-4 attached hereto.

(c) Unjust gains;

The Defendant purchased and sold E shares of KRW 250,000,000 from May 5, 2009 to December 1, 2009, pursuant to the agreement with F and I from around December 1, 2009 to purchase and sell shares of KRW 63,642,00,000 for capital increase with four accounts in U.S.; on December 4, 2009, the Defendant participated in the allocation of new shares to a third party in the name of E in the name of B and sold shares of KRW 1.25,09,000 to KRW 73,09,000 after having sold the entire shares of KRW 878,042,00 for E shares after having purchased the total shares of KRW 2,457,357,000,00 for capital increase due to price manipulation and received the above shares from KRW 36,00,000,000 for KRW 1,531,206.37

Accordingly, the Defendant, in collusion with F, J, L, K, and I, obtained the unjust enrichment of KRW 1,66,13,270 from the P’s account by artificially raising 176.24% from 4,905 won (the highest price among the pages of January 27, 2010), by making a price manipulation order, such as a conspiracy trading, etc., for the purpose of making a false judgment or inducing another person to make a false judgment with respect to the transaction of E, or by making another person do so.

2. Price manipulation of stocks of V stock companies;

A. From March 26, 2010 to April 26, 2010, the CF acquired V stock companies (hereinafter “V”), and conducted capital increase with a total of KRW 6.713 billion per share to a third party on April 24, 2009, and received protective deposits for a period of one year, and ordered the Defendant to manipulate the price of V stocks in order to increase the share price at a time when the period of protective deposits expires and prevent the decline of share price due to mass sale after the expiration of the period of protective deposits.

Accordingly, the Defendant conspireds to make unfair profits by controlling the market price of J, K, L and V stocks, and subsequently, from March 16, 2010 to April 26, 2010, the Defendant purchased a total of 39 shares including 18 borrowed-name accounts, including 18 borrowed-name accounts prepared by A from March 16, 2010, and sold 6,849,491 shares. In the process of selling 6,491 shares, the Defendant controlled the market price as follows.

1) Market price manipulation by conspiracy and disguised trade

No one shall sell and purchase securities in collusion with another person to sell and sell the securities at the same time as he/she sells and purchases them with an intention to mislead another person to make a wrong judgment with regard to the sale and purchase of listed securities or cause another person to do so, and no one shall sell and sell the securities in a false manner with another person to buy and sell them at an agreed value, and any third person shall engage in the sale and purchase of securities without an intention to transfer his/her right in trading them.

On April 16, 2010, the Defendant issued an order to sell at 110,105 shares of V at 1,480 won per share in a place (IP address: X) where it is impossible to know by means of a securities account (W) at 12 points M in the National Bank of Korea (IP address) on April 16, 2010. At around 09:4:32 of the same day, the Defendant purchased at 52,000 shares per share at a place (IP address: Z) where it is impossible to know by means of a securities account (Y) in the name of the KS National Bank of Korea (IP address) at 1,480 won per share, and issued an order to sell at 1,480 shares of V shares at 09:4:32 of the same day after the 15th day of the order to sell and purchase 33,239 shares at 1,480 won per share, and the Defendant conspired with 289,59999 shares per share.

(ii) price manipulation based on actual transactions;

No one shall make, independently or in collusion with other persons, sale and purchase transactions in the securities market, creating a false or misleading appearance of active trading or causing a fluctuation in the market price with the intention to attract anyone to buy and sell securities.

(A) high-priced purchase

On March 16, 2010, the Defendant issued an order to purchase KRW 130,00 per share of KRW 1,20 won at 1,180 per immediately, 36,725 won from 1,175 won, 36,725 won from 1,180 won from 1,185, and 14,736 won from 20 won from 1,200 won from 20 won from 1,180 won from 1,725 won from 1,175 won from 200 won from 20 won from 20 won from 36,725 won from 1,175 won from 1,186 to 1,180 won from 36,200 won from 1,165 won from 2, 2010 to 316, 216, 36, 25, 2016.

B) Order for purchase

On March 17, 2010, the Defendant: (a) purchased 1,305 won; (b) purchased 1,285 won; and (c) purchased 1,285 won; and (d) purchased 1,280 won per share with less 25 won, which is less likely to be concluded under 250,628 weeks, in order to purchase 50,00 won per share with 50,00 won, and purchase 50,00 won per share with 16,345,000 won, which is the highest price, so that purchase 50,00 won per share with 16,345,00 won, and 30,000 won per share without intention to purchase ; and (b) the Defendant made an order for purchase 16,340,000 won per share with the highest price of purchase ; and (c) made an order for purchase 20,340,000 won per share with the attached list 20,40,40.

C) On April 19, 2010, the Defendant issued an order to purchase stocks of KRW 1,600 per share of KRW 1,600 per share of KRW 1,605,00 per share of KRW 1,60 per share of KRW 1,60,00 per share of KRW 1,755,00 per share of KRW 25,224 in a place (IP address) where it is impossible to know by means of a securities account (AD) account (IP address) in the name of 3 branch of Korea Korea Bank of Korea (AD) at the same place (IP address) on April 19, 2010, the Defendant issued an order to purchase stocks of KRW 1405,00 per share of KRW 1,60 per share of KRW 1,600 and issued an order to use a paper 405,075 S. S. S. 2-4, together with J, L, and K, and the Defendant issued an order to use a paper 8989 times.

3) Undue gains

Accordingly, the Defendant, in collusion with F, J, L, and K, obtained the unjust enrichment of KRW 587,952,556, by artificially raising 54.3% from 1,150 won (the highest price as of March 15, 2010) to 1,755 won (the highest price as of April 26, 2010), for the purpose of making a false judgment or inducing another person to make a false judgment with respect to the sale and purchase transaction of V, or through the manipulation order such as the purchase and sale, etc. (the highest price as of March 15, 2010).

B. From July 2, 2010 to September 3, 2010, the criminalF directed the Defendant to manipulate the market price of V stocks in order to acquire unfair market prices profits by raising the stock price as V’s stock price falls in the first half of KRW 1,000.

Accordingly, the Defendant, along with J, L, and K, conspiredd in order to gain unfair profits by operating the market price of V shares, and thereafter, from July 2, 2010 to September 3, 2010, the Defendant purchased 4,83,787 shares through a total of 31 shares account, including 15 borrowed accounts prepared by the Defendant from July 2, 2010, and sold 5,452,543 shares. In the process of selling 5,52,543 shares, the Defendant controlled the market price as follows:

1) Market price manipulation by conspiracy and disguised trade

No one shall sell and purchase securities in collusion with another person to sell and sell the securities at the same time as he/she sells and purchases them with an intention to mislead another person to make a wrong judgment with regard to the sale and purchase of listed securities or cause another person to do so, and no one shall sell and sell the securities in a false manner with another person to buy and sell them at an agreed value, and any third person shall engage in the sale and purchase of securities without an intention to transfer his/her right in trading them.

On July 8, 2010, the Defendant issued an order to sell 13,000 shares of V shares to 1,080 won per share in a place (IP address: X) where it is impossible to know by means of a securities account (AF) in the name of Sokkin Bank M (IP address) of Sokin Bank M (IP address). At around 10:23:54 on the same day, the Defendant purchased KRW 8,000 shares per share in a place (IP address: AI) where it is impossible to know by means of a securities account (AH) in the name of 2nd branch AG (IP address) of 10:23:54 on the same day after 7 second day of the order to sell, and at around 10:23:54 on the same day, the Defendant conspired to sell KRW 8,00 shares of V shares at KRW 1,080 per share, 260,2420 on the same day, together with the Defendant, 35:4145.5

(ii) price manipulation based on actual transactions;

No one shall make, independently or in collusion with other persons, transactions in the securities market, creating a false or misleading appearance of active trading or causing a fluctuation in the market price of the securities, with the intention of soliciting the sale and purchase transaction of securities.

(A) high-priced purchase

On August 11, 2010, the Defendant issued an order to purchase KRW 1,370 per share of KRW 1,370 per share of KRW 1,370 and KRW 25,370 per share of KRW 1,370 and KRW 25,000 per share of KRW 1,370 and KRW 25,370 per share of KRW 1,370 and KRW 25,000 per share of KRW 25,370 and KRW 1,360, KRW 1,370 per share of KRW 25,00 and increased at KRW 1,360 to KRW 1,370 and KRW 1,370 per share of KRW 1,360 and KRW 1,370 per share of KRW 1,360 and KRW 250 per share of KRW 25,000, and the Defendant issued an order to purchase the shares through the attached Table 250-1,65,79.

B) Order for purchase

On August 11, 2010, the Defendant: (a) purchased 1,365 won; (b) purchased 1,365 won; (c) purchased 1,345 won; and (d) purchased 1,320 won per share of 1,320 won, which is less likely to enter into a contract with 202,185 won; and (c) purchased 85,000 won per share of 85,00 won per share of 1,320 won (or equivalent to 10 shares) with a purchase order to increase the remaining purchase price, and thus making it difficult to 695,300 won per share of 55,300 won a total purchase price available at a place (IP address) without the intention to purchase in X; and (d) the Defendant entered 305,300 shares per share of 30,500 won per share of 1,300 won per 555 times as if the purchase price was the highest price.

C) On September 1, 2010, the Defendant issued an order to purchase KRW 1,500 per share of KRW 1,500 per share of KRW 1,59,00 in a place (IP address) where it is impossible to know by means of securities account (N) M in the name of a national server branch of Korea (IP address): 14:59:53 at the same time (IP address) and 8,827 share of KRW 1,500 per share of KRW 1,500 per share of KRW 483,108 M in order to order the Defendant to take a 4883,108 Scand of KRW 130,550 Mcand over 130 times in total, as described in J. L and K, together with the order to take an order to take a 483,108 Scand over the same day.

3) Undue gains

Accordingly, the Defendant, in collusion with F, J, L, and K, obtained a total amount of 899,213,535 won by artificially raising 50.23% from 1,085 won (the highest price as of September 3, 2010) to 1,630 won (the highest price as of July 1, 2010), for the purpose of making a false judgment or inducing another person to make a false judgment with respect to the sale and purchase transaction of V, or through price manipulation orders such as the purchase and sale, etc. (the highest price as of September 3, 2010).

Summary of Evidence

1. Defendant's legal statement;

1. Each statement of the witness K and G;

1. Each prosecutor's protocol of examination of the accused;

1. I. Each prosecutor's interrogation protocol concerning JL and K;

1. Each prosecutor's protocol of statement against AJ, J, K, and K;

1. The defendant's written answer;

1. Each investigation report and accompanying documents;

Application of Statutes

1. Article applicable to criminal facts;

Articles 443(2)2 and 443(1)4, 176(1)1, 2, 3, and 176(2)1 of the Financial Investment Services and Capital Markets Act, Article 30 of the Criminal Act (amended by Act No. 10259, Apr. 15, 2010)

1. Aggravation of concurrent crimes;

Articles 37(former part), 38(1)2, and 50 of the Criminal Act (an aggravated punishment for concurrent crimes by concurrent crimes prescribed in the violation of the Financial Investment Services and Capital Markets Act due to the heavy E-marketing practice)

1. Additional collection:

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

Judgment on the argument of the defendant and defense counsel

1. Summary of the assertion

① The Defendant was instructed by F to manage E and V stocks and sold and purchased E and V stocks with J. However, L or K sold and purchased E and V stocks at its own discretion. As such, it is unfair to add up up to the profits acquired by L or K from each of the instant manipulation crimes to the profits acquired by L or K. ② The Defendant continued to sell and sell stocks not only once and twice as indicated in the facts charged, but also continuously purchased any profits by failure to commit the manipulation.

2. Legal doctrine

The "profit accrued from a violation" under Article 443 (2) of the Financial Investment Services and Capital Markets Act refers to the profit gained by the violator in question, and where multiple persons jointly commit an unfair trade such as manipulation, the profit accrued from the crime refers to the profit acquired by the whole of the accomplices who participated in the crime (see, e.g., Supreme Court Decision 2011Do3180, Jul. 14, 2011). In a joint accomplice relationship in which at least two persons jointly commit an offense, the conspiracy does not require any legal penalty, but is sufficient if there is an implied communication with each other on the joint commission of a crime directly or indirectly, and even if there was no process of the whole conspiracy, if there is a combination of doctors (see, e.g., Supreme Court Decision 92Do2832, Jul. 13, 1993).

In addition, the 'profit accrued from the violation of the proviso of Article 207-2 of the Securities and Exchange Act (amended by Act No. 6695 of Apr. 27, 2002) refers to all the profits accrued from the violation, and therefore, the profits accrued from the specific transaction during the period of 'market price manipulation' (hereinafter referred to as 'realization profit') and the appraised profit of the stocks subject to market price manipulation held at the time of the end of 'unrealization profit' (hereinafter referred to as 'unrealization profit') should be included (see, e.g., Supreme Court Decision 2001Do606, Dec. 12, 2013). Such interpretation can also be applied to the interpretation of Article 443 (1) of the current Financial Investment Services and Capital Markets Act.

3. Determination

According to the above evidence, the Defendant: (a) purchased E and V shares to L and K; (b) purchased E and V shares to J and K; (c) purchased and sold E and V shares to J with K; and (c) sold and purchased E and E and V shares to J with K’s account; and (d) K sold and purchased shares to K and sold to the Defendant upon knowing that price manipulation for E and V shares was conducted by the Defendant, etc.; (c) paid part of its profits to the Defendant under the pretext of commission; (d) sold and sold V shares to the Defendant at the time of the purchase and sale of its account; (e) sold and sold shares to the Defendant at the time of 10th of May; and (e) sold and sold shares to the Defendant at the time of 20th of May; and (e) sold and sold shares to the Defendant at the time of 10th of 6th of 6th of 7th of 200, 36th of 6th of 200, 36th of 6th of 20.

Considering the above facts in light of the above legal principles, it is reasonable to view that the Defendant committed each of the instant manipulation crimes in collusion with L and K in sequence under an implied intent contact. Ultimately, it should be deemed that the sum of the realized profit and unrealized profit at the time of the end of the commission of each of the manipulation crimes acquired by all accomplices, including L and K, should be deemed as the profit amount from each of the instant manipulation crimes.

Therefore, the above argument is not accepted.

Reasons for sentencing

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

(a) A violation of the Financial Investment Services and Capital Markets Act due to stock price manipulation;

1) Scope of Recommendation: Securities crimes, crimes infringing on fairness in the capital market (unpublished important information utilization, manipulation of market prices, illegal transactions), Type 3 (not less than KRW 500,000, less than KRW 5 billion), the area of aggravation (two years and 7 years of imprisonment);

2) Persons under special circumstances: Where a significant impact on the actual stock price, etc. or the scale of unfair trade has been very large (in the case of manipulation of market prices or unfair trade).

B. A violation of the Financial Investment Services and Capital Markets Act due to the manipulation of V stocks from March 16, 2010 to April 26, 2010: Securities crimes, crimes infringing on fairness in the capital market (unpublished important information, manipulation of market prices, illegal transactions), types 3 (at least 500 million won, less than 5 billion won), basic area (at least 3 years to 6 years of imprisonment).

C. A violation of the Financial Investment Services and Capital Markets Act due to the manipulation of V stocks from July 2, 2010 to September 13, 2010: Securities crimes, crimes infringing on fairness in the capital market (unpublished important information, manipulation of market prices, illegal transactions), Type 3 (not less than KRW 500,000, less than five billion), and basic area (two years and six years of imprisonment).

(d) The scope of final sentence due to the aggravation of multiple offenses: four years to 12 years of imprisonment;

2. Determination of sentence;

Although the defendant does not have been punished for the same previous violation, the defendant is dissatisfied with part of the profit amount from the legal perspective, the fact that most of the crime of price manipulation in this case is led to the confession of most of the crime of price manipulation in this case, and that the price decline immediately after the commission of each of the manipulation in this case and that the profit acquired by the defendant would not reach the entries in the judgment.

On the other hand, the defendant committed each of the manipulations in this case under the leading position, which led to the increase of 50% to 176% from the price below the market price, and the total profits from the manipulations amount to 3.1 billion won. The fairness of the capital market has been substantially impeded. The defendant, other than G and I, also, acquired unjust profits by means of receiving part of the profits as a commission, in case where he acquired profits due to the manipulations by the defendant, etc., after soliciting the sales force of the shares subject to the manipulations.

The punishment shall be determined in consideration of all the circumstances shown in the pleadings of this case, such as the age, character and conduct, environment, means and result of the crime, and the circumstances after the crime.

The acquittal portion

The summary of this part of the facts charged is that the defendant committed the crime described in Paragraph 1 of the judgment in sequence with 'AL' by inviting the defendant to manipulation the price of 'AL and FO E' after inviting the defendant to manipulation the price of 'E'. Thus, it is not sufficient to acknowledge the defendant's interrogation of the first prosecutor's interrogation of the defendant, the first prosecutor's protocol of the defendant, and the first prosecutor's statement of the BE, and there is no other evidence to acknowledge it.

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, inasmuch as it is found that there is a violation of the Financial Investment Services and Capital Markets Act due to the act of stock price manipulation in the judgment related to the comprehensive crime

Judgment on the application for compensation

An applicant for compensation filed an application for compensation with respect to KRW 38,532,635 of the purchase price of shares against the Defendant on the ground that the Defendant purchased E shares without knowledge of the fact that the Defendant had committed an act of price manipulation of stocks, and each of the instant offenses does not constitute a crime subject to a compensation order under Article 25(1) of the Act on Special Cases Concerning the Promotion, etc. of Legal Proceedings, but does not intend to seek the agreed amount of compensation between the Defendant and the applicant for compensation, and thus, the application for compensation of this case is dismissed in accordance with Article 32(1)

The transfer of judge and judge

Judges Kim Dong-dong

Judges Guide-in