South Korean prosecutors have filed criminal charges against HSBC and three traders for illegal short selling amounting to $12 million. The traders being accused made trades worth 15.8 billion won in 11 separate transactions from August to December 2021. They were selling stocks they didn’t own or hadn’t borrowed.
Under South Korea’s Capital Markets Act, those involved in naked short selling could face one year in prison or a fine up to five times the gains earned. Additionally, prosecutors are investigating whether senior officials from global asset management firms were involved in these transactions.
Prosecutors allege that HSBC deleted files related to naked short selling at its Korean branch’s server and stored some files overseas to impede regulatory access. The bank has yet to comment on the charges.
BNP Paribas is also under investigation for shorting stocks worth 40 billion won across 101 companies without borrowing them first. The French bank was previously fined 19.02 billion won for these actions. Together, HSBC and BNP Paribas face the largest-ever penalties for illegal short selling in South Korea, amounting to 26.52 billion won.
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