Regulatory Roundup: South Korea’s Largest Stock Manipulation Scheme: How CFDs Fueled a $500M Fraud Operation

Analysis

What’s worse than a rogue trader? A rogue investment firm.  

For this month’s analysis, we’ll take a look at an interesting case in which an unregistered investment firm executed the largest stock market manipulation in South Korea’s history. The firm employed 50 people across their sales management, trading and settlement teams. The firm took money from 900 investors and used those funds to run a complex multi-year pump-and-dump scheme, which made them 730 billion Korean won, or approximately 500 million USD. (For perspective, the prize for winning Squid Game was only 45.6 billion won.) This was all made possible by the extensive use of Contracts for Difference (CFDs) in the scheme to hide their activity and create massive leverage. 

Stealthy Accumulation: Building Hidden Positions 

A typical pump-and-dump scheme has three phases, with the first being accumulation. Ra Deok-yeon, the mastermind and founder of Hoan Investment Consulting, didn’t need to use just his own money. According to records, Ra’s organization acquired mobile phones and securities accounts from numerous investors, and they were effectively in control of their investors’ trading activity. Through this, they accumulated positions in eight Korean stocks.

The Pump: Inflating Prices via Collusive Trading and CFD Leverage 

Over time, this accumulation caused the eight stocks to steadily rise, and the scheme entered the pump phase. During this phase, the activity became more complex. They began using techniques such as matched orders (collusive trading) and other manipulative practices to push the price up. Ra’s team also began acquiring large positions using Contracts for Difference (CFDs) across those eight stocks. Using CFDs, they were able to both hide their activity and apply large amounts of leverage. 

The Dump: A Historic Crash and Its Fallout 

When the time for the dump came, it was huge. 3,400 CFDs were sold on April 24th, 2023, causing major drops in those stocks. Even with circuit breakers kicking in, the eight companies fell a combined 8.2 trillion won ($5.5 billion), and the shares hit the 30% circuit breaker four days in a row. As a result, investors across Korea were shocked at the market disruption, thousands lost money, and trust in the securities market was eroded.

The Aftermath: Legal Reckoning for the Perpetrators 

We are now seeing the after-effects of the case. Ra Deok-yeon was sentenced to a substantial prison term of 25 years for market manipulation and tax fraud. 25 other individuals working at Hoan Investment were also sentenced, but the judge was much more lenient, with most only receiving suspended sentences. The court stated, “the defendants appear to have been mechanically mobilized to commit the crime under the orders of their superiors.”

The reaction from Korean regulators was substantial. CFDs played a key role in the fraud scheme. Regulators focused on them because they were used both to hide activity and to leverage impact. As a result, the Korean Financial Services Commission (FSC) responded with a series of more stringent rules around trading CFDs. 

First, the FSC required greater transparency on disclosing who is trading the CFDs. Second, the requirements for those who can trade CFDs tightened. And finally, CFD traders are now required to deposit 40% of their CFD trading. Overall, this gives Korea one of the strictest CFD trading requirements in the world, demonstrating a clear example of how financial fraud shapes our regulatory landscape.

November 2025 Capital Markets Regulatory Updates

30 November 2025: Japan’s Financial Services Agency (FSA) plans to mandate crypto exchanges to hold liability reserves equivalent to a portion of customer assets, aiming to ensure that platforms can compensate users in case of hacks or operational failures.

26 November 2025: A U.S. judge ruled that Kalshi’s political event contracts fall under Nevada gaming regulations, meaning the platform must comply with state gambling laws despite its federal designation as a regulated exchange. 

25 November 2025: The U.S. Commodity Futures Trading Commission (CFTC) approved Polymarket as a fully regulated prediction market, enabling intermediated U.S. market access and expanding its ability to offer regulated prediction markets under U.S. oversight. 

21 November 2025: The U.K. Financial Conduct Authority (FCA) proposed changes to transaction reporting rules that could save firms around £100 million annually by simplifying requirements and reducing compliance burdens while maintaining data quality for market oversight.

20 November 2025: The U.S. Office of Enforcement and Regulatory Accounting released its 19th annual report detailing fiscal 2025 activities across investigations, audits and market surveillance, along with settlements totaling $36.57 million and compliance findings.

20 November 2025: Two U.S. Senators introduced a bipartisan market structure discussion draft to empower the CFTC as the primary regulator for digital commodities, establishing exchange registration, disclosure rules and fees—shifting oversight from the SEC. 

19 November 2025: The FCA launched a consultation on introducing a U.K. equity consolidated tape to improve market transparency, boost liquidity and strengthen the global competitiveness of U.K. equity markets by providing investors with a unified view of trading data across venues.

17 November 2025: The U.S. Securities and Exchange Commission (SEC) Division of Examinations announced its 2026 priorities to enhance transparency and guide registrants on key compliance areas, focusing on fiduciary duty, new rules like Regulation S-P amendments and heightened risk factors to protect investors and maintain fair markets.

17 November 2025: The Philippine Securities and Exchange Commission (SEC) plans to introduce a whistleblower protection program to encourage reporting of corporate and securities law violations, aiming to combat scams, insider trading and other illicit activities while strengthening market integrity and transparency. 

11 November 2025: The International Organization of Securities Commissions (IOSCO) released its “Final Report on Financial Asset Tokenization,” analyzing the adoption of financial asset tokenization, highlighting its potential efficiency gains, associated risks and varied regulatory approaches, while providing guidance to ensure market integrity and investor protection. 

2 November 2025: The EU is preparing reforms to give the European Securities and Markets Authority (ESMA) U.S.-style oversight powers over major stock and crypto exchanges, aiming to centralize regulation to cut red tape and boost cross-border market competitiveness. 

2 November 2025: The Hong Kong Securities and Futures Commission (SFC) will allow local licensed crypto exchanges to connect with global shared order books, a major policy shift to boost liquidity and price discovery by integrating Hong Kong’s crypto markets with international exchanges. 

Latest Fines and Enforcement Actions

• A Seoul court convicted 25 people in South Korea’s largest stock manipulation case, a scheme that drove up stocks and subsequent crash, imposing suspended sentences for most lower-level offenders while noting the scam’s unprecedented scale of 730 billion Korean won, or approximately $500 million.
• A federal grand jury in the District of Columbia indicted a Hong Kong man for orchestrating a scheme using fake SEC filings and shell entities to lure investors into buying Chinese stocks, causing hundreds of millions in losses.
• FINRA fined a German bank $2.5 million and censured it for failures in research report disclosures from 2007-2025, citing tens of thousands of reports missing required details and insufficient supervisory systems to ensure compliance.
• India’s Central Electricity Regulatory Commission (CERC) opened an investigation into GNA Energy over alleged insider trading, after the Securities and Exchange Board of India (SEBI) found GNA executives traded Indian Energy Exchange shares based on confidential information about an upcoming CERC market-coupling order.
• The SFC obtained a court injunction freezing HK$82.4 million in assets of 12 people suspected of manipulating Smartac International’s shares (2018–2019).
• The German Federal Financial Supervisory Authority (BaFin) fined a European financial services firm €45 million for systemic anti-money-laundering failings, after the bank “systematically” filed suspicious activity reports months late in 2021–2022.
• FINRA fined Nomura Securities International $625,000 for including accounts of two foreign affiliates in aggregation unit calculations without proper oversight, violating Regulation SHO and FINRA supervisory rules.
• U.S. authorities charged eight individuals in Massachusetts with securities fraud and money laundering for allegedly operating a global insider trading network that used material non-public information from corporate insiders to make tens of millions in illicit profits between 2016 and 2024.
• The New Zealand Financial Markets Authority (FMA) filed High Court civil proceedings against an experienced retail investor based in Auckland, for alleged market manipulation of NZX-listed shares of Steel and Tube Holdings Limited.
• The SFC charged two individuals with running an illegal short-selling scheme—using false positions to short 28 stocks in 2020.
• FINRA fined Wedbush Securities $150,000 for failing to maintain possession or control of customers’ excess margin securities, lacking adequate supervisory systems and issuing incomplete trade confirmations between 2018 and 2023.
• The Montreal Exchange found BMO Nesbitt Burns guilty of front-running, ruling that a former BMO trader hedged ahead of a client’s large bond orders in 2019 for the firm’s benefit—violating rules and triggering a failure in BMO’s trade supervision.
• Genius Group Ltd filed a federal securities class action lawsuit in the Southern District of New York against two major firms, alleging a multi-year market manipulation scheme involving spoofing and naked short selling of its shares, seeking at least $250 million in damages on behalf of all affected investors.
• The Hong Kong Eastern Magistrates’ Court convicted a finfluencer to six weeks imprisonment for running a paid Telegram stock tips group without authorization—Hong Kong’s first imprisonment for illicit investment advice on social media.  

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