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[Newsmaker] Dongbu Group chief faces insider trading probe

Korea’s financial watchdog said Wednesday it is likely to report steel-making giant Dongbu Group founder and chairman Kim Jun-ki to the prosecution for insider trading charges.

“The authorities have been looking into stock trading records of the tycoon to figure out whether he conducted unfair transactions based on insider information about faltering Dongbu Engineering & Construction,’’ an official from Financial Supervisory Service said, adding the case will be referred to the prosecution if the charges are confirmed. 




FSS reportedly started its investigation following a report by the Korea Exchange last year.

The country’s sole securities exchange operator found a number of borrowed-name stock trading accounts whose real owner was 72-year-old Kim in the course of an investigation into dubious massive stock selling by different shareholders of Dongbu Engineering & Construction, conducted before the builder filed court receivership in 2014.

The KRX’s report also showed that the chairman held considerable shares of other key Dongbu affiliates, including Dongbu Corp., Dongbu Securities and Dongbu Insurance, by using different false-name stock trading accounts.

“Considering his stake in the group’s construction arm, he was estimated to save millions of won by selling off his stake in Dongbu E&C earlier than other shareholders based on the insider information on the firm’s filing for court receivership.

According to industry sources, during an investigation by the financial watchdog, Kim admitted he has borrowed-name stock trading accounts for more than two decades in a bid to defend his control over the group, but denied the insider trading charges.

In response to the financial watchdog’s investigation into the Dongbu chairman, civic groups raised the repeated moral hazard issue of Korean business tycoons linked to insider trading.

Recently, Choi Eun-yeong, former chairwoman of Hanjin Shipping, came under the scanner over her insider trading charges. Choi and her two daughters have been accused of selling their stocks in faltering Hanjin Shipping just days ahead of the firm’s application for creditor-led restructuring.

By Seo Jee-yeon (jyseo@heraldcorp.com)
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