Former Shinpoong Pharm CEO Indicted for Insider Trading

 

 

 

 

The Securities and Futures Commission (SFC) under the Financial Services Commission has filed a complaint with the prosecution against Jang Won-jun, former CEO of Shinpoong Pharm, for violating the Capital Markets Act.

On the 12th, during a regular meeting, the SFC determined that Jang and Shinpoong Pharm's holding company, Songam, had used undisclosed material information to gain unfair profits. The decision was officially announced on the 17th.

Jang, the actual owner and second-generation successor of Shinpoong Pharm’s founder, is accused of avoiding a loss of KRW 36.9 billion by leveraging internal information related to the clinical trial results of a COVID-19 treatment under development by the company.

In April 2021, he allegedly sold a large quantity of Shinpoong Pharm shares through a block deal (after-hours bulk trading) via Songam, a company operated by himself and his family. Later, the company’s COVID-19 treatment failed to meet the targeted efficacy in its Phase 2 clinical trial.

The SFC believes Jang was aware of this unfavorable information beforehand and sold the shares accordingly.

Shinpoong Pharm, however, refuted the allegations, claiming that Jang did not have knowledge of the clinical trial results when he sold the shares in April 2021.

A company representative stated, “The clinical trial results were officially announced in July 2021, and even internally, we only became aware of them in May. The claim that he knew about the results and sold the shares in April is not true.”

Meanwhile, Jang is already on trial for allegedly creating a KRW 9.1 billion slush fund by inflating raw material supply costs. He has been sentenced to prison in both the first and second trials.

Under the current Capital Markets Act, those who use undisclosed material information for unfair gains face at least one year of imprisonment and fines up to 35 times the amount of illicit profit (increasing to 46 times starting March 31).

Depending on the scale of the unfair gains, the maximum penalty could be life imprisonment.

A financial regulatory official stated, “This is a serious case in which the actual owner of a KOSPI-listed company used insider information to the detriment of general investors. Given the gravity of the matter, we decided to refer the case to the prosecution.”

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Former Shinpoong Pharm CEO Indicted for Insider Trading