"Isn't This ○○Investment?" Unlicensed Stock Scam Swindles 500 Billion Won from Trusting Investors

Rampant Solicitation for Unlisted Investments... FSS Issues Precautions

Check for Licensing Status and Review Securities Registration Statements

If Claims of “Imminent Listing” Are Made, Verify Lead Underwriter and Relevant Details

Multi-level stock sales organization Group A used unlicensed entities with names similar to professional investment firms such as ‘○○Partners’ and ‘○○Investment’ to acquire unlisted stocks at low prices and resell them at high prices to general investors. The total sales volume reached 500 billion won. Throughout this process, not a single securities registration statement, which would have allowed investors to identify investment risks, was submitted.

Mr. B, the CEO and largest shareholder of an unlisted pharmaceutical and biotech company, sold his personal holdings of unlisted shares worth 5 billion won to general investors without submitting a securities registration statement or providing an investment prospectus. Although Mr. B emphasized that “the product under development is an innovative anticancer drug expected to be approved by the U.S. Food and Drug Administration (FDA) and soon to grow in the KOSDAQ market,” investors were not given information regarding investment risks and ultimately suffered significant losses.

As the number of investors incurring losses increased due to solicitations to invest in unlisted companies—where it is difficult to check financial status and business details—the Financial Supervisory Service has begun issuing alerts about precautions for investors.

On September 7, the Financial Supervisory Service provided guidance on precautions for investing in unlisted companies. Because unlisted stock investments are high-risk, investors should not rely solely on explanations from those soliciting investments, but must verify objective materials.

First, investors should check the disclosures on the Financial Supervisory Service’s DART electronic disclosure system. If no audit report appears when searching a company’s name on DART, it may indicate that the company is small and does not meet external audit standards, which in turn means that listing may take a significant amount of time. Moreover, if investment solicitation is being carried out for more than 50 investors, but a securities registration statement or small-scale public offering disclosure documents cannot be found, one should suspect illegal solicitation.

It is also necessary to verify the party soliciting the investment. Even if the soliciting entity uses a name similar to a financial company, such as ‘○○Partners’ or ‘○○Investment’, it may still be unlicensed. One can check whether an entity is an official financial firm through the Financial Consumers Information Portal operated by the Financial Supervisory Service, and the Korea Venture Capital Association publishes a list of its member companies.

If one is told that “listing is imminent,” it is crucial to verify the listing prospects through various means. The selection of a lead underwriter and the electronic registration of shares require a significant amount of time even before a listing. In particular, if the contract for the registrar and transfer agent assignment for appointing a lead underwriter has not yet been signed, the company is only at the early stage of preparing for listing. The existence of a registrar and transfer agent contract can be checked on the Korea Securities Depository’s SEIBro portal, and the Korea Exchange’s KIND system publishes a list of companies that have applied for preliminary review for listing.

An official from the Financial Supervisory Service stated, “If investment solicitation is being carried out for many investors but a search of the company name on DART does not return a securities registration statement, or the stock sales company appears to be unlicensed, please report it to the Financial Supervisory Service.”

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