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.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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