FSS launches probe into fraud stock allegations involving LG family

[Photo by MK DB]

South Korea‘s financial authority has launched an investigation into allegations that Koo Yeon-kyung, head of the LG Welfare Foundation, purchased shares of a Kosdaq-listed company using undisclosed information.

Koo is the eldest daughter of the late LG Group Chairman Koo Bon-moo.

According to sources from the financial investment industry on Sunday, the Financial Supervisory Service (FSS) recently summoned and questioned an official who serves as a non-executive director of a Kosdaq-listed biotech company.

The investigation was related to Koo’s acquisition of shares in the company, sources said.

The Kosdaq company raised 50 billion won ($36.15 million) in April 2023 through a third-party allocation of new shares from BlueRun Ventures (BRV) Capital Management.

BRV Capital Management is a global growth investment platform of BlueRun Ventures, a Silicon Valley-based institutional investor. Koo’s husband, Yoon Kwan, serves as the chief investment officer (CIO) of BRV Capital Management.

The company’s official who was summoned for investigation is the vice president of BRV Korea Advisors Co., the Korean entity of BRV Capital Management.

The official joined the Kosdaq-listed company through a shareholder meeting in March 2024 after BRV Capital Management invested in the company in 2023.

Insiders noted that Koo personally acquired 30,000 shares of the company, although the exact timing of the purchase is unclear. The suspicion arises depending on when Koo bought the shares, potentially using undisclosed information.

If Koo bought the shares before the investment announcement, it would lend weight to the suspicion that she used undisclosed information about the investment, which was unknown to the general public at the time of purchase.

The Kosdaq-listed company’s stock price, which was around 16,000 won per share at the end of March 2023, surged over 16 percent on the day BRV Capital Management made the investment announcement, and soared to 50,000 won at one point in the year.

Article 174 of the Capital Markets Act prohibits the use of undisclosed significant information related to the business of a listed company for trading specific securities.

Violators of the law are subject to imprisonment for at least one year or a fine of at least three to five times the amount of profit gained or loss avoided by the act.

An FSS official declined to confirm the recent summons, saying that “we cannot confirm whether a specific individual is under investigation.”

Amidst this controversy, Koo recently tried to donate the 30,000 shares she held to the LG Welfare Foundation in an apparent effort to escape the controversy surrounding her stock acquisition, according to sources, but the foundation was unable to decide whether to accept Koo’s donated shares as foundation assets at its board meeting held on May 10, 2024.

Some board members reportedly expressed reluctance to handle the matter, citing the suspicions surrounding Koo.