Court First to Rule Warrant Unlawful in Stock Manipulation Probe... Prosecutors, FSC Bow to Ruling

For the first time, a court has ruled that the financial authorities' failure to return seized evidence within the deadline during the investigation into the so-called 'first stock manipulation disgrace' was illegal. The representative of the Minor Stockholders Association, identified by his surname Shin, filed a motion for reconsideration with the Seoul Southern District Court on the 14th to challenge this decision, while the Financial Services Commission (FSC) also filed a reconsideration on the same day, leaving the legal battle awaiting the Supreme Court's final judgment.

The controversy arose when the 'Joint Response Team for Eradicating Stock Manipulation,' composed of the FSC and the Financial Supervisory Service (FSS), launched its first forced investigation into a group accused of artificially manipulating the stock price of KOSPI-listed DI Dongil to gain unfair profits amounting to tens of billions of won. Court rulings were divided. The court viewed the Joint Response Team's refusal to return the evidence seized from Mr. Shin and others by the deadline—violating the 10-day limit—as illegal and canceled the initial seizure warrant. Conversely, it deemed the second search and seizure conducted by prosecutors with a new warrant based on that evidence lawful, stating it was an "independent action with a severed causal link."

Mr. Shin's side finds it difficult to accept the split decision. Their reasoning is that while a significant defect was acknowledged in the initial seizure, only the re-seizure by prosecutors was ruled lawful. They argue that the so-called 'fruit of the poisonous tree' principle should apply, meaning subsequent evidence derived from illegally collected evidence cannot be used in trial.

The controversy over procedural flaws was one of the main reasons for the rejection of arrest warrants for key suspects last month. In rejecting the arrest warrants, the court stated, "It is necessary to await the outcome of the quasi-appeal case." Will the Lock on Challenging Administrative Investigations Open?

This case is also the first matter for the Supreme Court to determine whether coercive measures by administrative agency investigators can be subject to challenge. The authorities argued that the FSC investigation is an administrative inquiry distinct from a search and seizure by investigative agencies and thus the appeal itself should be dismissed, but the lower court recognized it as a legitimate procedure.

The legal community predicts that if the Supreme Court recognizes this case as subject to quasi-appeal, suspects will engage in legal battles over procedural flaws regarding measures by administrative agencies with coercive investigation powers, such as the FSC or the Fair Trade Commission. Until now, the FSC has maintained the practice of holding onto evidence secured through forced investigations without returning it, then transferring it as-is to investigative agencies.