A key suspect in a large-scale stock manipulation case that has recently shaken the local financial markets was detained by prosecutors Tuesday.
Ra Deok-yeon, head of an unregistered investment consulting firm, was apprehended at his home at around 10:25 a.m. and taken to the Seoul Southern District Prosecutors Office, according to the prosecutors who formed a joint investigation team with the Financial Services Commission and the Financial Supervisory Service 11 days ago.
Ra's firm was at the center of the recent collapse of stock prices of nine companies.
The stocks of the nine listed companies had steadily risen for years before nose-diving late last month following mass sell-offs through SG Securities Korea Co., the local branch of the Societe Generale Group of France.
About 1,000 investors are said to have suffered a huge loss estimated to be between 800 billion won (US$606 million) and 1 trillion won.
The 42-year-old Ra is suspected of having manipulated the prices of the stocks through an "order matching" technique after taking over mobile phones and personal information from investors.
Order matching refers to a kind of fictitious transaction in which a buyer and a seller trade stocks at a predetermined price and time. The securities exchange law prohibits order matching, as it can make the concerned stock's trading volume appear bigger that it really is.
Ra is also accused of concealing parts of the investment proceeds and evading taxes through his business entities, and running an unregistered investment consulting business.
Since its establishment on April 28, the joint investigation team has booked Ra and other suspects on charges of masterminding the suspected stock price manipulation, raided their offices and homes, and tracked their bank accounts.
Later on Tuesday, the other two key suspects -- surnamed An and Byun -- were also detained by prosecutors on charges of colluding with Ra.
An, a former professional golf player, operates a golf studio in Seoul's southern Gangnam Ward, which was allegedly used as a window to retrieve a commission from the investors, prosecutors said.
Ra has recognized that he traded the concerned stocks after receiving investors' mobile phones and securities accounts but denied any act of matching orders.
About 60 clients of Ra's investment company, who claim to have lost a combined 100 billion won, filed a criminal complaint against Ra and six others Tuesday afternoon on charges of fraud, breach of trust and concealment of criminal proceeds.
A law firm representing the clients said more victims are expected to launch civil and criminal lawsuits against Ra later.
In the complaint, the investors said they did not know a large amount of debts were incurred and the contract for difference (CFD) accounts were opened because Ra only disclosed investment profits without revealing a large amount of debts and loans. CFD trading is a type of financial derivative that speculates on the price movement of stocks.
Source: Yonhap News Agency