Financial elites who graduated from a Seoul National University business club have been caught operating an "information cartel," sharing undisclosed merger and acquisition (M&A) information for years to rake in more than 20 billion won in illicit profits.

The Joint Response Task Force for Eradicating Stock Manipulation—comprising the Financial Services Commission, the Financial Supervisory Service, and the Korea Exchange—announced on the 29th that it had caught individuals exploiting undisclosed information, including private equity fund operators and listed company officials who made illicit gains through this method, and raided some 20 locations including the suspects' homes and offices.

According to authorities, about five key suspects in their 30s and 40s built their connections while participating together in a Seoul National University business club and global consulting firms.

They later moved to respective private equity fund operators and listed companies, working as executives and handling tasks related to M&As, including tender offers.

Investigations showed that they repeatedly shared positive, undisclosed information regarding five stocks acquired during their work over the past five years or so.

They also passed on the information to family members and acquaintances to use in stock trading.

Authorities found that a total of some 10 individuals, including the core suspects along with their families and acquaintances, pocketed over 20 billion won in illegal profits by purchasing the stocks ahead of public disclosures and disposing of them at high prices after the information drove up share prices.

Authorities view the case as grave given that the sharing of undisclosed information within an intimate information cartel was repeated over a long period, and that the source of the information consisted of M&A professionals who were bound by strict confidentiality obligations.

"Rather than accessing information as insiders of listed companies, they exploited undisclosed information from the target companies while handling M&A work," a joint response task force official said. "Taking this case as an opportunity, we will strive to further expand investigations into this type of offense."

Currently, the Securities and Futures Commission has suspended securities accounts holding the funds in accordance with the Capital Markets Act to prevent the suspects from concealing their illicit gains.


The joint response task force first identified suspicious accounts showing trading patterns based on undisclosed information during the market monitoring phase, and then found the links between the traded stocks and individuals.

It conducted in-depth analyses by consolidating cases where the same suspects were repeatedly involved, and carried out investigations in cooperation with related agencies starting last May.

"We have been investigating for two years, and through extensive fund tracking, transaction analysis, and investigations into human networks, we expanded our scope and confirmed personal connections," a joint response task force official said. "We will verify the facts to see if the evidence and statements match through the search and seizure."

The joint response task force stated that its previous experience handling a case involving undisclosed information tied to an executive at NH Investment & Securities helped uncover this case.

Authorities conducted compulsory investigations in October of last year regarding suspicions of undisclosed information use by an executive at NH Investment & Securities, which managed a tender offer, and referred the suspect to prosecutors in May of this year.

"The NH Investment & Securities case helped us track what kind of information could be accessed and how they were related to each other," a joint response task force official said. "While the NH Investment & Securities executive's actions stood out easily because they handled management duties, these individuals were difficult to trace."

Authorities announced plans to quickly wrap up additional investigations by analyzing materials and evidence secured through voluntary questioning and search-and-seizure operations on this day.

They also plan to push for follow-up measures such as referrals for prosecution and the imposition of surcharges of up to twice the amount of the illicit gains.

Highlighting the significance of the operation, the joint response task force stated, "By conducting searches, seizures, and payment suspensions targeting the financial elites involved in this case, authorities have demonstrated that insiders' use of undisclosed information will be tracked to the end to root it out from the capital market and recover illegal profits."

(Photo provided by the Financial Services Commission, Yonhap News)