Questions raised over sales of EcoPro shares owned by imprisoned former chairman

EcoPro former chairman Lee Dong-chae

The recent selloff of EcoPro Co. shares worth a total 2.5 billion won ($1.9 million) is raising questions as they were sold without the authorization by the owner, its former chairman Lee Dong-chae, who is currently serving a prison sentence for his involvement in unfair trading using undisclosed information.

According to a regulatory filing by the South Korean battery material maker on Monday, a total of 2,995 EcoPro shares owned by Lee were sold without his consent over three occasions last week.

On October 16, 215 shares were sold for 879,000 won apiece, 1,000 shares for 851,349 won apiece on the following day, and 1,740 shares for 838,185 won on October 19.

“Police investigation is currently underway, and there may be changes in our regulatory filing following the police investigation results and in consultation with relevant authorities,” the company said.

EcoPro acknowledged the selloff after being informed of unusual trading activities by a domestic brokerage house that handled the former chairman’s shares on Thursday, according to industry sources.

The company promptly reported the findings to the police. EcoPro reportedly informed the police that the suspicious market activities were traced back to internet protocol addresses located in China and that the former chairman’s account password had also been changed.

The police and financial authorities are in the process of identifying relevant facts. A financial authority official stated that EcoPro reported a change in ownership allegedly due to identity theft, and that the authority instructed the company to make a regulatory filing concerning the change.

The Seoul Metropolitan Police explained that the case is under investigation as it was received on Thursday by its cyber investigation division, and that further details are not available at this stage.

While EcoPro assumes that the selloff was carried out through hacking, the brokerage house involved in the transactions in question denies the possibility of hacking, pointing out that access to an account in its trading system requires multiple layers of security steps.

Stock market insiders raise the possibility of a leakage of the former chairman’s identification.

Meanwhile, following the transactions in question, former Chairman Lee’s ownership in EcoPro fell by 0.01 percentage point. As of the end of June, Lee’s stake in EcoPro stood at 18.84 percent. When including stakes held by specially related persons, such as the 5.37 percent stake held by Eroom T&C, the largest shareholder’s stake in EcoPro amounts to 26.12 percent.

Eroom T&C is a related company registered in Lee’s wife’s name, with its stakes largely held by his two sons. No EcoPro shareholder holds more than a 5 percent ownership stake, other than Lee and related individuals.

Former Chairman Lee was sentenced to two years in prison in August for his involvement in the trading stocks of EcoPro affiliate, EcoPro BM Co., using internal information and gaining illicit proceeds of 1.1 billion won between 2020 and 2021. The Supreme Court also ordered Lee to pay a fine of 2.2 billion won along with a confiscation order to forfeit 1.1 billion won from him.