Tongyang Group probed for stock manipulation; FSS officials said hidden assets of the family will be used to compensate retail investors who sustained a huge loss from the purchase of corporate bonds and bills issued by the group

2013-10-10 17:35

Tongyang Group probed for stock manipulation

By Kim Tae-jong
The financial authorities are now investigating Tongyang Group for alleged stock price manipulation. But it is unknown whether the family that owns the group was also involved in fraudulent stock trading. “The special investigative department is now looking into the alleged stock manipulation case involving Tongyang’s affiliates,” an official from the Financial Supervisory Service (FSS) said.The financial regulator’s investigation came as stock prices of the group’s affiliates moved in an irregular manner last month when its liquidity crisis was at its peak.
The group’s five affiliates including Tongyang Cement & Energy and Tongyang Networks decided to seek a court receivership at the end of September.
But right before the critical decision, trade volumes and prices of those affiliates drastically increased.
Investigators suspected that they were influenced by rumors spread in the market, which were intentionally used to rig prices and increase trading volume. They are now seeking the source and motives for supplying such false information.
“It was rumored that Tongyang Group Chairman Hyun Jae-hyun held a meeting with CEOs of the group’s affiliates and said he would not seek court receivership but would make efforts to protect investors,” a market insider said. “This helped stock prices of some of the group’s affiliates increase suddenly.”
Refusing to comment on the probe, however, FSS investigators seem to believe that there is a possibility that such false information could have come from Tongyang, and key figures at the group took advantage of it.
Given the sensitivity and urgency of the case, the financial regulator also said it will also seek a joint investigation with the prosecution and the Korea Exchange.
The financial regulator is also investigating if the family that owns the group has hidden assets. It suspects that Tongyang Securities has been used to manage the family’s assets.
In fact, Lee Hye-gyeong, the group chairman’s wife who is also Vice-Chairwoman, is under criticism as she is suspected of taking out gold bars worth billions of won from the head office of the brokerage house in Eulji-ro, downtown Seoul.
She is the first daughter of the group’s late founder Lee Yang-gu. She has 3.42 percent, 4.96 percent and 0.12 percent stake in Tongyang Inc., Tongyang Networks and Tongyang Securities.
Previously, she was also found to have taken out 600 million won in cash from her personal safe-deposit box at the brokerage house on Sept. 29.
FSS officials said hidden assets of the family will be used to compensate retail investors who sustained a huge loss from the purchase of corporate bonds and bills issued by the group.
The authorities said a large number of retail investors were not properly informed of the risks associated with the corporate bonds and bills.