Justice Minister nominee Rep. Kim Seung-won is facing scrutiny over his ties to Genencell, a biotech company whose COVID-19 treatment claims were factors in a Financial Supervisory Service investigation into alleged stock-price manipulation.
Kim is accused of passing on a request to drug authorities to approve clinical trials for a Genencell drug in October 2021. It is also alleged that the subsequent approval was used in stock price manipulation.
An FSS report obtained by lawmakers yesterday suggested misleading information about Genencell’s treatment candidate had already been used in a similar stock-rigging scheme.
According to the report, KH Fillux promoted its 1.5 billion won ($1.1 million) investment in Genencell and other pharmaceutical ventures through media coverage containing misleading information. The regulator estimated alleged illicit gains of 11.58 billion won from the resulting inflated share price.
The FSS particularly questioned Genencell’s claim that Indian authorities had approved a clinical trial of the same drug, ES16001, as a COVID-19 treatment. India’s clinical-trial registry showed that the study was instead part of a process to designate the product as an Ayurvedic, or traditional Indian, medicine, the regulator said.
Genencell argued that the study followed a separate procedure under Indian regulations and that authorization from the relevant institution carried the same meaning as the approval it had announced.
In January 2021, Genencell said the trial had produced a 95 percent recovery rate. KH Fillux shares surged 29.95 percent that day.
The FSS found that KH Fillux later sold shares converted from convertible bonds at elevated prices and raised 116.8 billion won through a rights offering in March 2021.
Suspecting unfair trading through deceptive or improper means, the regulator sought compulsory measures to secure evidence and consulted prosecutors in December 2022. It requested emergency action from the Securities and Futures Commission chairman the following month.
It remains unclear whether those measures were taken or how the case was resolved. The FSS is also examining other trading activity linked to Genencell, according to a person familiar with the matter.
ch0221@heraldcorp.com
