Numerous investment fraud cases have emerged, including a multi-level marketing organization that sold unlisted company stocks worth approximately 500 billion won to general investors, prompting a warning from financial authorities.
On September 7, the Financial Supervisory Service (FSS) stated, "As interest in the domestic stock market rises, so does the interest in investing in unlisted stocks, which promise high returns before listing. However, unlisted stocks carry high investment risks due to limited information and low trading activity, so investors must exercise caution."
In fact, a multi-level stock sales organization, Group A, sold unlisted company stocks worth about 500 billion won to general investors over several years through phone calls and messaging apps like KakaoTalk. However, they never submitted a securities registration statement, violating the Capital Markets Act. The group's representative has been sentenced to prison and fined, with an appeal currently underway.
Although Group A was an unlicensed entity, investors were reportedly misled by sales companies with names resembling professional investment firms, such as 'OO Partners' and 'OO Investment.'
There have also been cases where claims of developing innovative cancer drugs and plans for KOSDAQ listing were later proven false.
The CEO (largest shareholder) of unlisted company B, which operates in the pharmaceutical and biotech sector, sold 5 billion won worth of stocks to general investors, promoting that the product under development was an innovative cancer drug nearing FDA approval and KOSDAQ listing. However, they did not use the investment prospectus required by the Capital Markets Act. The company was aware of the stock sales but failed to follow necessary procedures, such as submitting a securities registration statement.
Despite facing high investment risks due to operating losses, investors made decisions without receiving sufficient information, resulting in significant losses.
The FSS recommended three key checks before investing in unlisted stocks: searching for company information in the FSS electronic disclosure system, verifying whether the investment solicitation company is a registered financial institution through the Financial Consumer Information Portal, and directly confirming the status of any impending listings.
The FSS explained, "Unlisted stocks often have limited disclosure obligations, making it difficult to objectively verify a company's financial status and business details. This can lead to cases where investors are lured by unverifiable claims about new technology development, new business initiatives, or false listing plans."
Additionally, the FSS noted, "The infrastructure and number of participants for trading unlisted stocks are limited, making it difficult to sell at the desired time, and investors may need to search for buyers themselves. If the listing process is delayed or fails, investors may be unable to recover their funds for an extended period or incur significant losses."
Therefore, investors are advised to directly verify company information through the electronic disclosure system or search the 'Public Offering Information Menu' for securities registration statements and small offering disclosure documents. They should cross-verify company information through the Financial Consumer Information Portal and the Korea Venture Capital Association, especially if the company promotes itself as 'listing imminent,' and ensure to confirm with objective data.
* This article has been translated by AI.
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