Former CEO of Kukil Paper, Arrested for Selling Stocks Using Insider Information Before Filing for Corporate Rehabilitation

The former CEO of Kukil Paper, Choi Woo-sik, has been arrested on charges of using insider information to sell stocks before filing for corporate rehabilitation.

According to the Seoul Metropolitan Police Agency on the 1st, Choi was arrested on charges of violating the Capital Markets Act, specifically using insider information and failing to report a large stockholding. The police are currently investigating the case.

Choi, who is the second-generation owner of Kukil Paper, is accused of selling approximately 13 million shares of the company, valued at about 10 billion KRW, using insider information last March. Kukil Paper, established in 1978, manufactures specialty and industrial papers.

Under the Capital Markets Act, anyone holding more than 5% of the shares in a publicly listed company must report their stockholdings, purposes, and key contracts to the Financial Services Commission and the stock exchange. Choi is accused of failing to comply with this reporting requirement.

The police believe that Choi used insider information to avoid losses by selling his shares just before the company filed for rehabilitation, and they conducted a search of Kukil Paper’s office and Choi’s residence on the 10th of last month.

Kukil Paper submitted its rehabilitation petition to the Seoul Rehabilitation Court on March 13th after a board meeting, and its stock trading was suspended the following day.

Earlier, Kukil Paper announced in July that it had entered into a conditional investment agreement with Samra Midas for a merger and acquisition (M&A). On the 11th of last month, the company submitted its rehabilitation plan reflecting Samra Midas’ investment plan to the court.

Following the Seoul Rehabilitation Court’s decision to start the rehabilitation process in April, the company has been pushing for a pre-approved M&A using the stalking-horse method, with Samra Midas, the holding company of SM Group, selected as the preferred bidder.