Min Jung-ki. Yonhap News. 

The special prosecutor's team, led by Min Jung-ki, which has been investigating various allegations concerning First Lady Kim Keon-hee for over three months, now faces a major setback due to escalating allegations of stock insider trading surrounding its leader.

Amidst the ruling People Power Party being cornered by investigations into alleged collusion between the Unification Church and the government, the allegations against Special Prosecutor Min Jung-ki, who is suspected of making hundreds of millions of won in profit through questionable stock transactions, are increasingly becoming a political issue, with calls for his resignation.

Given that the allegations directly involve the person in charge of the investigation, the ramifications are expected to be more significant than previous controversies faced by the special prosecutor's team, including collective protests by dispatched prosecutors, allegations of coercion in investigations of Yangpyeong public officials, and live broadcasts of the First Lady's interrogation.

The company implicated in Special Prosecutor Min's alleged dealings is NeoSemitech, a solar material manufacturer. The company was indirectly listed in October 2009 but had its trading suspended on March 24, 2010, due to a qualified audit opinion from its accounting firm, and was delisted in August of the same year.

Although it remains a notorious accounting fraud case that resulted in over 400 billion won in losses for 7,000 individual investors, Special Prosecutor Min disposed of his shares just before the trading suspension, reportedly making a profit of 158.74 million won.

While many ordinary investors suffered significant losses due to their ignorance of the accounting fraud, criticism has arisen regarding the suspicious circumstances of Min's successful "exit." In response, the special prosecutor's team stated on the 17th through a press release that the sale was made at the recommendation of the brokerage firm.

Special Prosecutor Min's position is that his initial investment of tens of millions of won in NeoSemitech, which was unlisted at the time, was made not through company insiders but through an introduction from an acquaintance.

Min Jung-ki (left). Yonhap News. 

However, Min has not provided specific details such as the identity of the brokerage employee who recommended the sale or the acquaintance who introduced the company, nor the exact timing of the sale. This has fueled ongoing suspicions that he may have possessed non-public information.

The continuation of these suspicions appears to stem from the possibility that Special Prosecutor Min had ample opportunity to access non-public information, including evidence of accounting fraud, through his personal network.

Special Prosecutor Min was a classmate of Mr. Oh, the former CEO of NeoSemitech, from Daejeon High School and Seoul National University. Lawyer Yang Jae-taek, who served as an outside director and resigned shortly after the trading suspension, is also a classmate from the same cohort. He is also a peer from the 14th graduating class of the Judicial Research and Training Institute, alongside Special Prosecutor Min.

Mr. Oh was found guilty of selling approximately 2.4 billion won worth of shares under a pseudonym in three instances between March 3 and March 23, 2010, and subsequently absconding, after knowing that accounting fraud would be exposed. His conviction with an 11-year prison sentence was finalized in 2016.

Mr. Oh became aware of the accounting fraud discovery on February 26 of that year, when the accounting firm notified him of an on-site audit. If Special Prosecutor Min's stock sale timing falls between this date and March 24, when the trading suspension was announced, the possibility of him having received separate non-public information through academic or other connections becomes more significant.

Based on the number of shares he held and the profits from their disposal, the stock price at the time was slightly over 10,000 won. Given that the stock price was fixed at 8,500 won after the trading suspension, it is presumed that Special Prosecutor Min sold all his shares at least before then.

However, it is reported that stock transactions were conducted at the price at which Special Prosecutor Min sold his shares during some periods in January and February 2010, prior to Mr. Oh's disposal of shares based on non-public information.

Jang Dong-hyuk, CEO, at a press conference. Yonhap News. 

Special Prosecutor Min has only provided indirect explanations through the special prosecutor's team's announcements and has not disclosed his relationship with CEO Oh or the exact timing of his stock sales.

Coincidentally, NeoSemitech was also mentioned during the special prosecutor's team's face-to-face investigation of First Lady Kim in August.

When First Lady Kim claimed she did not participate in the stock manipulation of Deutsch Motors, stating, "I don't know much about stocks," the special prosecutor's team reportedly countered by mentioning her investment in NeoSemitech's convertible bonds (BW) in 2009.

Although this was not included in the indictment, the People Power Party is now questioning the legitimacy of the special prosecutor's investigation, arguing that Special Prosecutor Min, who faces similar allegations, is not qualified to investigate charges of stock price manipulation.

The special prosecutor's team is reportedly aware of the gravity of the situation and is internally discussing a course of action.

The special prosecutor's team, given the significant repercussions of the NeoSemitech incident and the fact that financial authorities would have extensively investigated suspected criminal cases, is understood to maintain that there is no likelihood of Special Prosecutor Min engaging in fraudulent trading, as has been alleged.

In fact, the Securities and Futures Commission at the time identified individuals who avoided losses by using non-public information from NeoSemitech around October 2010 and reported them to the prosecution.

It is understood that charges were applied not only to insiders but also to some investors, including acquaintances of management, who had learned that accounting fraud had been uncovered.

First Lady Kim Keon-hee leaving the Seoul Central District Court. Yonhap News. 

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