South Korean prosecutors have filed criminal charges against HSBC and three dealers for unlawful short selling worth $12 million. From August to December 2021, the accused dealers executed 11 transactions totaling 15.8 billion won. They were selling stocks that they did not own or borrow.
Under South Korea’s Capital Markets Act, persons who engage in naked short selling face a year in prison or a fine of up to five times their gains. Additionally, prosecutors are looking into whether senior executives from global asset management organizations were involved in these transactions.
Prosecutors claim that HSBC erased files connected to naked short selling from its Korean branch’s system and stored other files offshore to obstruct regulatory access. The bank has not commented on the allegations.
BNP Paribas is also being investigated for shorting stocks worth 40 billion won from 101 firms without first borrowing them. The French bank was already penalized 19.02 billion won for its crimes. HSBC and BNP Paribas face the highest ever penalty for unlawful short selling in South Korea, totaling 26.52 billion won.
