A Financial Supervisory Service official said, "This is not a formal investigation in accordance with a legal procedure. We are looking into the case of share price manipulation by CJ using the offshore account funds." Given the large volume of CJ Group shares outstanding which renders price manipulation almost impossible, the regulator is likely to focus more on the case of insider trading taking advantage of non-public information about the company.

 

To that end, the regulator is paying special attention to unusual flows of money coming from overseas as it is possible that CJ Group used false foreign investor names to purchase its own shares in efforts to buoy share price levels. Currently foreign investors are permitted to invest in domestic stocks and bonds under borrowed names, which implied that any Korean national can disguise as a foreign investor and make investments through Korean securities houses or asset management firms.

 

The percentage of CJ Group shares held by foreign investors rose to 23.91 percent in October 2007 from 18.97 percent in early 2007, falling again to 22.24 percent at the end of the year. CJ Group switched to a holding company structure in 2007. As of May 24 this year, the ratio of the group's shares owned by foreigners is 20.68 percent.