Supreme Court: 'Fake Investment Sites' Without Actual Transactions Also Violate Capital Markets Act

"Appearance Likely to Be Mistaken for a Real Market"

The Supreme Court has ruled that even if a “fake investment site”—on which no actual stock transactions occur—is set up and operated, it still constitutes a violation of the Capital Markets Act if it is made to look similar to a real trading platform.

Supreme Court, Seocho-gu, Seoul. Photo by Yonhap News

According to the legal community on June 5, the Supreme Court’s First Division (Presiding Justice Kwon Youngjun) overturned a lower court’s partial acquittal of Mr. A, who had been indicted for joining and participating in a criminal organization, fraud, and violating the Capital Markets Act. The case has been remanded to the Seoul Southern District Court for further proceedings.

The bench stated, “The financial investment product market as defined by the Capital Markets Act includes not only markets where actual trades occur, but also those with the appearance that would lead an average market participant, exercising ordinary caution, to believe that real trades are taking place.”

Mr. A allegedly worked as a customer service employee for a so-called “leading room investment fraud” organization, luring investors via a Telegram chat room from April to July 2024. The group is accused of creating a fraudulent investment site that appeared to sync with real-time domestic and international stock index data, thereby swindling a total of 8,436,280,000 won from 62 investors.

The main issue in this trial was whether a fake site—used solely as a tool to deceive victims and where no actual trades occurred—constitutes a “financial investment product market” as prohibited by the Capital Markets Act.

The first trial found Mr. A guilty on all charges and sentenced him to five years in prison. However, the appellate court partially acquitted him of violating the Capital Markets Act and reduced the sentence to four years, reasoning that the site was merely a means to deceive victims and that, since no real securities transactions occurred, it could not be definitively categorized as a financial investment product market.

The Supreme Court did not accept this. It stated, “Even if no actual trades took place on the investment site, if its appearance could mislead ordinary investors into believing it was a real market, there may be grounds for a violation of the Capital Markets Act. The lower court’s acquittal, based solely on the absence of real trades, was a misapplication of the relevant legal principles and thus affected the judgment.”

This content was produced with the assistance of AI translation services.