Financial regulators launched their inquiry into allegations that some affiliates of the embattled Tong Yang Group manipulated stocks before they filed for court receivership.
Out of the five Tong Yang units that applied for the court’s control last week, three firms ― Tong Yang Inc., Tong Yang Networks and Tong Yang Cement & Energy ― are listed on the Korea Exchange.
The main exchange issued a trading ban on equities of the three firms after they filed for the court’s control.
Another listed unit, Tong Yang Securities, was not included in the receivership list. While Tong Yang Life Insurance is also still being traded on the main bourse as a group affiliate under the antitrust law, its largest shareholder has been changed into Vogo Fund from Tong Yang Group.
The Financial Supervisory Service is focusing on the two major scenarios, casting doubt over the dubious fluctuation of the firms’ stock prices over the past few weeks.
“One might be fraudulent trading of affiliate shares by some Tong Yang owners misusing insider information before the conglomerate applied for court receivership of five nonfinancial units early last week,” said an official.
He said the other is speculative investment by some scammers exploiting the conglomerate’s liquidity crisis.
Meanwhile, regulatory officials have revealed that Tong Yang Financial Services, one of the group’s two loan shark units, issued irregular loans worth about 1.5 trillion won ($1.36 billion) to its debt-saddled affiliates over the past two years.
The FSS does not rule out the possibility that some financial units of the conglomerate were misused as an illegitimate funding source to nonfinancial affiliates.
Among them are loan shark unit TY Money Financial Services, Tong Yang Investment, Tong Yang Asset Management and Tong Yang Securities.
Tong Yang Group chairman Hyun Jae-hyun holds an 80 percent stake in TY Money Financial Services.
The FSS had widened its probe to look into whether the financial units engaged in behind-the-scenes intra-group trading.
Officials hinted that a key investigation target would be whether the six Tong Yang financial firms breached the supervisory rules banning manufacturing conglomerates from abusing their financial subsidiaries as a cash cow.
There is a high possibility that the antitrust regulator Fair Trade Commission or the prosecution will join the probe in a bid to check the appropriateness of the shareholding structure between Tong Yang’s financial and nonfinancial businesses, according to market insiders.
More and more market observers predict that some of the financial units could eventually be put up for auction. They say that their asset soundness might have worsened like their manufacturing affiliates.
The simultaneous application for court receivership comes amid chairman Hyun’s alleged effort to block default from maturing bills worth some 1 trillion won.
