Victim turns out to be culprit in fraud case

The owner of a wireless internet company had testified that he was the victim of two employees’ blackmailing him and that his company lost some 15 billion won ($13 million) because the culprits spread false information about the company concerning securities fraud.

The prosecution indicted the two in December, only to find two months later that the owner and his business partner had in fact committed securities fraud.

One employee indicted for blackmail, a 52-year-old surnamed Byun, graduated with a legal affairs major from Seoul National University. Another, a 44-year-old surnamed Jeon, graduated from the renowned Republic of Korea Naval Academy.

According to police, the president of an IT company, a 41-year-old surnamed Han, bought a wireless internet installing company in March last year. He hired Byun and Jeon to this company after he was introduced to them via acquaintances.

After they joined, the wireless internet company seemed to do very well. Word got around that the company would be investing in a low Earth orbit satellite communication network and that it was selected to accompany President Park Geun-hye on her trip to Iran last May, as part of her business delegation.

They were rumors, authorities said, but they were believed to be true by many investors. The price of the company’s stocks rose from 10,000 won per share last March to about 40,000 won by May. The company planned an event with some 10 international buyers in October.

But just before October, Byun and Jeon found that Han had spread false information on the company to drive up the company’s stock price, violating the Financial Investment Services and Capital Markets Act.

“We have submitted a petition to police on the corruption within the company,” Byun and Jeon reportedly told Han. “If you pay us 1 billion won each within four days, we will cancel our petition to police.”

According to authorities, Han said he would pay the money if they cancelled the petition first. The two refused. The petition was processed and the Korea Exchange in October put out an inquiry notice. With this, the stock price of the company dropped 29.98 percent on that day.

Han then sued Byun and Jeon.

“The two accused me of a securities fraud without any evidence, and blackmailed me constantly. I paid them 1.6 billion won,” Han wrote in his petition to police. “Because of what they did, the company image plummeted and it suffered some 15 billion won in costs.”

Police handed over the case to prosecution, which in December indicted Byun and Jeon for blackmail.

Within two months, however, Han and his business partner, a 51-year-old surnamed Lee, who was the president of the wireless internet company that Han bought, were arrested by prosecutors in Seoul for securities fraud.

Prosecutors indicted the two on Feb. 2 for spreading false information and raking in about 10 billion won worth of illegal profits. The company’s stock has been scrapped from the market since Han’s indictment.

“If Byun and Jeon received money from Han, they are still viable to be legally prosecuted,” said a police officer.

BY YUN JUNG-MIN [chung.juhee@joongang.co.kr]