“Tell Choe Donggi to come into my office.”
The Stock Surveillance Office of the Financial Supervisory Service.
It was the department that cracked down on unfair stock trading, a task force made up of personnel from the Financial Services Commission, the Financial Supervisory Service, the Korea Exchange, and other organizations.
“I’m going to finish that bastard off today, no matter what.”
The surveillance office chief, who headed the TF, loosened his tie and took off his wristwatch.
This was already the fifth time. The fifth time he had submitted an absurd report.
Team Leader Choe Donggi, who had been summoned, had already submitted the same report five times, and if he wasn’t left half-dead today, it seemed likely he would submit a sixth one next time.
“You called for—”
“You son of a bitch!”
The moment Choe Donggi appeared, the chief hurled the report at him.
“I told you clearly. If you want to write fiction, do it at home!”
“…”
“These five stocks are being manipulated? If you’re right, then the FSS, the FSC, and the Exchange are all idiots, aren’t they? A manipulation scheme went on for a whole year, and nobody even caught a whiff of it?!”
The chief had every reason to be furious.
They had already run the matter through their programs several times and concluded that there was nothing abnormal. But Choe Donggi had refused to let go of his delusions, and today he had finally created this mess.
“…Chief. Please, just once, listen seriously to my explanation.”
“Then are you saying I haven’t been listening seriously until now?”
“That’s not what I meant…”
“Fine, then. Spout off. But make me one promise. If you say the same thing again this time, you’re resigning. Otherwise, I will.”
“…Chief.”
“There’d be no reason for me to stay. The FSS, the FSC, the Exchange. Isn’t our job to wipe out market manipulators? If people like us even formed a TF and still couldn’t smell manipulated stocks for a whole year, then there’s no reason for the surveillance office to exist. It’d be right for you to be chief instead of me. Isn’t that right?”
The strength drained from Choe Donggi’s fists.
Perhaps this was his last chance… to say he was sorry.
As the chief had said, the stocks he had pointed out were far too sophisticated, and because of that, no program had been able to detect any anomalies.
“…With all due respect, I believe they are manipulated stocks.”
But Choe Donggi severed the last bridge back.
“Over the past year, these five stocks have risen by as much as five times. Their upward patterns were always the same, and the dates of the rises were always days with the lowest trading volume. This is clearly the operators choosing low-volume days to conduct collusive trades.”
“Oh, really? But what a shame. None of the stocks you suspect are penny stocks.”
Choe Donggi’s expression darkened.
“Explain that. Two of the companies you suspect are public enterprises, and two others are major corporations. If you were going to manipulate a stock, you’d turn a 500-won stock into 5,000 won and dump it. If it were you, would you run a job on a KOSPI-listed company?”
“…That makes it even more suspicious.”
“What?”
“Those two public enterprises you mentioned… they’re ordinary public enterprises with no favorable factors to speak of. Stocks like that suddenly rose fivefold.”
“You idiot, they say gas prices are likely to rise because of the Russo-Ukrainian War! Isn’t that the favorable factor?”
“Do you really believe that, Chief?”
The chief was slightly flustered.
This was different. Normally, by this point, the words I’m sorry should have come spilling out, but today Choe Donggi was stubbornly talking back.
Had he driven the rat too far into a corner?
“What does that have to do with anything? How is the Russo-Ukrainian War good news for a gas supplier in the Seoul metropolitan area? If that were really the case, shouldn’t Korea Gas Corporation be the one rising? But Korea Gas Corporation’s stock price actually fell. If the leading stock is like that, how can the small fry rise?”
“Hey, Choe Donggi.”
“More than anything else, the pension fund sold off its holdings. Its assets in them weren’t that large, but over the past two days, it sold almost everything.”
Choe Donggi denounced it as if coughing up blood, but all that came back was the chief’s cold expression.
“Then that makes it even clearer. They aren’t manipulated stocks.”
“…Pardon?”
“Even though the pension fund sold everything, the stock prices didn’t fall that much.”
“That’s because the holdings themselves weren’t very large…”
“Donggi! Choe Donggi! Team Leader Choe!”
The strength drained from Choe Donggi’s fists.
It was over.
“They’re KOSPI stocks. Hm? Not trash stocks, KOSPI stocks!”
“…”
“If you were an operator, would you target penny stocks or blue-chip KOSPI stocks? The stocks you pointed out—if they were truly pushed up by manipulation, we’re talking at least hundreds of billions of won. Then how exactly did the operators prepare that kind of ammunition?”
“Recent stock manipulation has been using multilevel methods…”
“Then what about the duration! Have you ever seen a manipulated stock rise for a whole year? Were those operators wearing bomb collars on each other? If one guy betrays the rest, it collapses like dominoes, so how could that be maintained for a year?”
There was nothing he could say.
Collusive trading, multilevel schemes… Even when he applied every criminal pattern found in recent manipulation cases, these stock prices simply could not be explained. There were only a handful of people in Korea who could put up that kind of money, and even if multiple operators had joined forces, there was no way a traitor would not have emerged over the course of a year.
“Clear out your office.”
The chief spoke firmly.
“That cautious nature of yours is better suited to the Insurance Fraud Response Team than the Stock Surveillance Office. I’ll have you transferred there, so from now on, go catch insurance fraudsters.”
“Ch-Chief.”
“Shut your mouth and clear out! You brought this on yourself.”
As befitted its name, at the Financial Supervisory Service, departments related to finance were key posts, while those related to consumer protection were considered dead-end positions.
The chief’s order was no different from exile.
After Choe Donggi bowed his head and left powerlessly, the chief grumbled.
“Damn bastard. How did he end up in a finance department? I should’ve sent him to insurance ages ago. Tsk, tsk.”
He reviewed the last paper the man had submitted and focused on his computer screen.
“What’s supposed to be strange about this?”
On the computer screen, the Korean stock market and the five stocks the man had submitted were overlaid.
He truly was a blockhead. Every indicator, including trading volume, pointed to “no problem.”
“What’s strange, huh? What’s so strange about it… Hm? What is this… Something’s a little odd. What the hell is this? Why is it suddenly doing that? Hm? Hm…? Why is it doing this! Why is this so strange?!”
Someone once said that stocks were the art of timing.
After he had torn into Choe Donggi as if catching a rat, the five stocks Choe had pointed out hit their lower limits without any warning or reason.
*
Our next story.
Amid sudden allegations of stock price manipulation, the KOSPI plunged for a fourth consecutive day, closing at 2,198 points.
Individual investors were already furious because, even as global stock markets were recovering, the KOSPI alone continued to perform poorly.
To make matters worse, allegations of stock manipulation worth hundreds of billions of won struck the market, causing even blue-chip stocks to fall and breaking through the psychological support line of 2,200.
The trigger was the pension fund’s liquidation of assets.
Recently, the pension fund sold all its holdings in Sacheolli, Gyeonggi Gas, Holdings, and others. These stocks had risen by as much as nearly five times over the past year and had already been suspected of stock manipulation even before that.
What drove the nail in was China’s Changcheng Fund.
A week ago, Changcheng Fund pointed out the bubbles in those stocks and carried out a large-scale short sale. The scale amounted to an astonishing 500 billion won, sending the relevant stocks straight down to their lower limits.
Changcheng Fund’s short report was only one page long and extremely simple: “There is no reason for them to rise.”
Until now, Sacheolli, Gyeonggi Gas, and others had explained that “gas stocks rose due to uncertainty from the Russo-Ukrainian War.” The Changcheng report pointed out that this was “an issue with no connection whatsoever, and even if there were a connection, a 500% rise would be impossible.”
The Changcheng report described this as a typical scheme of exaggerating a needle into a cudgel. It explained that an international issue with little relevance had been exaggerated to distort stock prices.
If uncertainty surrounding natural gas had truly been a favorable factor, then the leading stocks should have risen first, yet there was no change at all in the stock prices of companies such as Korea Gas Corporation.
In addition, it criticized the reasons behind the surges in the stock prices of meat companies, video companies, construction companies, and others as all being absurd exaggerations.
CEO Ming Wei, who released the short report, said in an interview with this paper, “We had been watching these stocks for a long time,” and added, “The recent stock manipulation took on a considerably different form from existing cases.”
Ordinarily, stocks with small share issuance, low stock prices, and low trading volume have mainly been used for stock manipulation. This time, however, the manipulation unfolded in KOSPI-listed stocks and major corporate shares.
Stocks with high issuance volume and trading volume like these not only make collusive trading difficult, but also require a tremendous amount of capital to raise their prices.
CEO Ming said, “We estimate that the capital mobilized for the stock manipulation was at least around 700 billion won,” and added, “We do not know what method was used, but it was operated in a highly organized manner.”
As a result, the anger of individual investors turned toward the Stock Surveillance Office of the FSS, which had failed to detect it early.
Although there had been a preliminary stage lasting a full year, the FSS had not even designated them as issues for management, let alone made any proper disclosure.
According to this paper’s reporting, even now, those inside the FSS appear bewildered by the reality of the stock manipulation.
An anonymous official explained, “There is no precedent for KOSPI stocks and public enterprise stocks being used in a manipulation scheme,” and added, “In fact, we haven’t even identified who the victims and perpetrators are.”
The view is that because Changcheng Fund struck first through short selling, the manipulation forces may have instead suffered losses. It is also believed that sell orders from the participating forces have already been pushed far down the queue in the market.
However, because the way the stock prices rose over the past year closely resembles collusive trading and other schemes, the official explained that they would “request the prosecution to determine the facts at an early date.”
But regardless of how the investigation concludes, criticism of the FSS’s responsibility is expected to grow even fiercer.
Meanwhile, on this day, a “pension fund responsibility theory” began spreading among the communities for the relevant stocks.
This is because Changcheng Fund, which carried out the short sale, was a consigned asset manager for the pension fund. In fact, the pension fund discloses all its consigned managers and portfolios on its website, and Changcheng Fund was listed among them.
Looking at the timeline, it was revealed that Changcheng Fund carried out a large-scale short sale just one week after receiving assets from the pension fund.
One anonymous investor posted, “The pension fund supplied the ammunition,” and argued, “Chinese capital is trampling the domestic stock market, yet the pension fund is instead serving as its vanguard. The contract with that investment firm must be terminated immediately, and the person in charge must be dismissed.”
The argument is that if the pension fund had not entrusted assets to a short-selling force, this would not have happened.
Did the stocks collapse because of short selling, or did stock manipulators truly inflate a bubble?
With the prosecution’s investigation only just beginning, a fierce battle over responsibility between the FSS and the pension fund appears inevitable for the time being.
Gim Jiseon reports with the details.