Financial authorities in South Korea have uncovered an alleged insider-trading network involving members and alumni of a Seoul National University business club, with investigators saying the group may have generated more than 20 billion won ($14.7 million) in illicit gains through undisclosed M&A information.
The Financial Services Commission, Financial Supervisory Service and Korea Exchange jointly raided more than 20 locations, including suspects’ homes and workplaces, as investigators sought evidence of a suspected network that allegedly shared confidential information about mergers, acquisitions and corporate governance changes.
Authorities said the investigation centers on more than five financial professionals who attended Seoul National University and later worked at asset management firms, private equity firms and listed companies.
According to the joint task force, the suspects allegedly obtained sensitive information through their professional involvement in M&A transactions rather than as traditional insiders working directly for listed companies. That information was allegedly shared repeatedly before becoming public.
The suspected trading pattern involved purchasing shares ahead of announcements that could significantly affect stock prices, then selling after the information became public and prices rose, authorities said.
Investigators are also examining allegations that confidential information was passed to family members and acquaintances, who may have used it to trade the affected stocks.
Investigation Traces Network Across Financial Industry
Authorities said the suspected activity was not limited to a single transaction. Investigators have been examining transactions and financial connections for roughly two years, eventually combining several cases after detecting recurring links between the individuals involved.
The Korea Exchange initially identified suspicious trading patterns through its market-surveillance system. A joint investigation began in May after authorities expanded their analysis of cases involving individuals suspected of repeatedly using undisclosed information.
The information under investigation reportedly included tender offers and other M&A-related developments capable of having a substantial impact on listed companies’ share prices once publicly announced.
Authorities said the latest searches are intended to help establish how the information was obtained, transmitted and used in trading.
More Action Could Follow
The investigation remains ongoing. Authorities said they will analyze evidence collected during the raids before deciding on further measures, including possible criminal complaints and financial penalties.
Under South Korean capital-market rules, authorities can impose fines of up to twice the amount of illicit gains in cases involving the use of undisclosed information, according to the joint task force.
The case underscores the difficulty regulators face in tracking confidential information as it moves through professional networks spanning investment firms, private equity companies, consultants and their personal connections.
For now, the individuals involved have not been found guilty in court, and the allegations remain subject to investigation and potential legal proceedings.
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