Accounts tracked in CNK diamond scandal

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Accounts tracked in CNK diamond scandal

Korea’s financial watchdog has probed 32 investors that traded more than 50,000 shares in Cameroon diamond mine developer CNK International’s inflated stocks, as well as tracking down 59 accounts that made a profit from CNK’s warrant bonds.

However, additional ties to high-ranking officials or political heavyweights were not detected during the watchdog’s investigations, leaving prosecutors to tie actual owners with the investment accounts tracked down by financial regulators.

Investor losses due to stock manipulation linked to the CNK International scandal are expected to reach 100 billion won ($89.3 million), new data from financial regulators shows.

According to a Financial Supervisory Service report to prosecutors yesterday, 32 investors sold 50,000 shares of CNK International within 70 days of the Ministry of Foreign Affairs and Trade distributing a press release that used false information to show the profitability of CNK’s diamond mines on Dec. 17, 2010.

CNK’s stock price, which had averaged around 3,000 won in the first 10 months of 2010, rose more than five times to peak at 16,700 won on Jan. 11, within a month of the Foreign Ministry announcing that some 420 million carats of diamonds were deposited in the Cameroon mine to which CNK had won development rights.

Even estimating a conservative 10,000 won return per share, these 32 investors would have made at least a combined 16 billion won. Adding the 80 billion won that CNK International Chairman Oh Deok-gyun gained by selling his own stake, regular investors’ losses are estimated at 100 billion won.

The FSS said that although the list of 32 investors included Cho Jung-pyo, a former secretary at the Prime Minister’s Office who was already known to be involved, there were no other high-profile political figures on the list. The FSS tracked down transactions between Dec. 18, 2010 and Feb. 28, 2011.

Moreover, the FSS has completed its investigation into the sale of about 100 CNK International warrant bonds, which some had suggested were sold cheaply in political circles as a form of bribery.

Warrant bonds are bonds with an attached warrant that entitles the purchaser to a certain number of shares of the borrowing company for a certain period at a price fixed in advance. The 100 warrant bonds held the right for 370,000 CNK shares.

Of 59 accounts that traded the bonds, Cho was found to have gained returns of 1 billion won by selling 260,000 shares thorough warrant bonds. “We paid special attention to accounts where false names were used, but there were no new signs of wrongdoing found in the stock transaction records,” said a high-ranking FSS official.

By Lee Jung-yoon []

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