Korean Regulators Probe Alumni Network Over 20 Billion Won in Alleged Insider Trading

South Korean financial authorities are investigating an alleged insider-trading network that they say used confidential merger and acquisition information to generate more than 20 billion won, or about $14.7 million, in illicit profits.

A joint task force involving the Financial Services Commission, the Financial Supervisory Service and the Korea Exchange searched more than 20 homes and offices on Tuesday. Regulators also froze brokerage accounts containing suspected proceeds to prevent funds from being transferred or concealed while the investigation continues.

The inquiry centers on a group of Seoul National University alumni working in finance. Authorities believe connections formed through a university investment club and a global consulting firm helped confidential information circulate among finance professionals, relatives and friends. Around 10 people allegedly traded on the information over a period of five years.

Five suspects in their 30s and 40s are believed to have played central roles. They held senior positions at private equity firms and listed companies, giving them access to sensitive information about tender offers and other corporate transactions. Investigators allege that the core group shared nonpublic information concerning five stocks on at least five occasions. Participants then bought shares before transaction announcements and sold after the disclosures lifted prices.

The task force said some of those who supplied information had obtained it through their work on mergers and acquisitions rather than through employment at the companies whose securities were traded. The case therefore highlights the market-abuse risks surrounding advisers and other professionals who handle price-sensitive deal information under confidentiality obligations.

Market surveillance initially identified suspicious accounts. Investigators then traced links among the trades, the securities involved and the individuals behind the accounts, examining fund flows, trading histories and personal relationships. The broader inquiry has been underway for about two years, with the three agencies coordinating their work since May.

Authorities said an earlier case involving an executive at NH Investment & Securities helped reveal the wider network. That executive was investigated over allegations of trading on information obtained while serving as lead adviser to a tender offer, and regulators filed a complaint in May.

The Securities and Futures Commission ordered the account freezes under the Capital Markets Act. Investigators will now analyze materials seized in the raids, verify statements and determine the extent of each participant’s role. Authorities said they intend to finish the inquiry promptly, refer suspects for prosecution where warranted and seek administrative fines of up to twice the amount of illicit gains.