Open Decision Ledger · Capital markets & finance
Meaning of matched and fictitious sales under the Securities and Exchange Act and of the purpose of inducing trading transactions; determination of the point at which market manipulation commenced
Translated from the Korean original. Read the Korean
Supreme Court, Nov. 29, 2007, 2007Do7471 (judgment)
No holding summary · checked against points at issue. The official text publishes no summary of the holding for this decision. The quotation and factors in this record are copied verbatim from the points at issue; the evidence for each axis is taken from the points at issue, the order and the reasons.
Case name: 증권거래법위반·상법위반·사기
Official text on the National Law Information Center
Question
What do 'the purpose of causing a person to make an erroneous decision' in Article 188-4 (1) of the Securities and Exchange Act, 'the purpose of inducing trading transactions' and 'a trading transaction that causes the market price to fluctuate' in paragraph (2) of the same Article mean, and how are they determined?
Holding
The two purposes may coexist with other purposes and awareness of the possibility suffices; a trading transaction that causes the market price to fluctuate is established where there is a possibility of artificially moving the market price, and an actual fluctuation is not required. The Supreme Court held that these requirements may be determined by weighing circumstantial evidence as a whole, rejected the defense that the accumulation was for acquisition and merger purposes, and, accepting the finding of the court below that market manipulation commenced on June 7, 2005, dismissed the appeal.
Points at issue, verbatim
증권거래법 제188조의4 제1항 위반죄 성립의 주관적 요건인 ‘거래가 성황을 이루고 있는 듯이 잘못 알게 하거나 기타 타인으로 하여금 그릇된 판단을 하게 할 목적’의 의미
Unofficial English translation
The meaning of 'the purpose of making others falsely believe that active trading is taking place or otherwise causing others to make an erroneous judgment,' which is a subjective requirement for establishing the crime of violating Article 188-4 (1) of the Securities and Exchange Act
Disposition
Dismissed Stated in the decision
상고를 기각한다.
Unofficial English translation
The appeal is dismissed.
Form of the test
Existing test applied Read from the decision
앞서 본 법리와 기록에 비추어 살펴보면, 원심의 이러한 판단은 옳은 것으로 수긍이 가고
Unofficial English translation
Looking at this in light of the legal principle stated above and the records, such determination of the court below is correct and convincing, and
Factors
- 거래가 성황을 이루고 있는 듯이 잘못 알게 하거나 기타 타인으로 하여금 그릇된 판단을 하게 할 목적
- 매매거래를 유인할 목적
- 유가증권의 매매거래가 성황을 이루고 있는 듯이 잘못 알게 하거나 그 시세를 변동시키는 매매거래
- 의미 및 판단 방법
Unofficial English translation
• the purpose of making others falsely believe that active trading is taking place or otherwise causing others to make an erroneous judgment
• the purpose of inducing trading
• a trading of securities that makes others falsely believe that active trading is taking place or that causes the market price thereof to fluctuate
• meaning and method of determination
Relation to precedent
Follows earlier decisions Stated in the decision
대법원 2005. 11. 10. 선고 2004도1164 판결
Unofficial English translation
Supreme Court Decision 2004Do1164 decided November 10, 2005
Decisions referred to
[1] 대법원 2005. 11. 10. 선고 2004도1164 판결(공2005하, 1993) / [2] 대법원 2006. 5. 11. 선고 2003도4320 판결(공2006상, 1079)
Burden of proof
Not addressed Not in the decision
Open question and revisit condition
Where shares are accumulated with a genuine intention of acquisition and merger but some high-priced orders are interspersed, what circumstantial evidence could negate the purpose of inducing trading transactions?
This reading will be rechecked if a new Supreme Court ruling emerges on the purpose requirement of the market manipulation prohibition provisions of the Financial Investment Services and Capital Markets Act, which succeeded Article 188-4 of the Securities and Exchange Act.
Cross-family AI independent reading & axis check
7 of 8 axes matched GPT-6 Astra (OpenAI, codex CLI) · 2026-10-16
When compared with an independent reading by a different AI line (GPT-6 Astra), which read only the original text without seeing the primary reading, 7 of the 8 axes agreed, and the readings diverged on the fourth axis (Form of the test).
Axis 4 (Form of the test): Primary “Existing test applied” vs Independent “Circumstances weighed”
Since the original text sets out the meanings of the purpose and the transactions and the method of determination, and the disposition is the appeal dismissed, the primary reading may place weight on the result of the application to the case, while the independent reading may place weight on the method of determining the purpose and the transactions.
‘매매거래를 유인할 목적’과 같은 항 제1호가 규정하는 ‘유가증권의 매매거래가 성황을 이루고 있는 듯이 잘못 알게 하거나 그 시세를 변동시키는 매매거래’의 의미 및 판단 방법Raw responses and comparison record: Protocol · Blind readings (JSONL) · Axis comparison (JSONL) · SHA-256 (JSON)
Lower-court contrast & scope of application
Lower-court reading vs. Supreme Court holding
Lower-court context: The court below found that the defendant commenced market manipulation on June 7, 2005, weighing as a whole the facts that the share price was raised from 1,445 won to 2,930 won through 66 high-priced buy orders, 8 matched orders, and 5 closing-price-related orders; that an overvalued corporate analysis report was circulated; and that no report of substantial shareholding was filed and no ordinary preparations for acquisition and merger were made. It also found the intent to defraud established. However, among the transactions in the accounts that were found not guilty for lack of proof, three matched sales and purchases were found guilty.
Supreme Court standard: The Supreme Court, in light of the existing legal principle that the purpose requirement is satisfied by awareness of the possibility and may be determined by weighing circumstantial evidence as a whole, accepted the findings of the court below regarding the point at which market manipulation commenced and the intent to defraud. It acknowledged a contradiction in reasoning as to some transactions, but held that, compared with a total of 4,404 occasions and 20,300,371 shares, the three occasions and 2,500 shares were so minute that they had no effect on the outcome of the judgment, and dismissed the appeal.
Distinguishing conditions
- Cases in which an intention of acquisition and merger is objectively supported, for example where the rise in the share price is restrained during the accumulation process and a report of substantial shareholding is filed and legal and accounting preparations for acquisition are made
- Cases in which no artificial pattern of trading unattributable to market factors, such as high-priced orders or matched transactions, is revealed
- The portion of trading for which the connection between the accounts used for market manipulation and the defendant is not proved
Record verification notes
Before asserting the same conclusion, it is first checked whether circumstantial evidence, such as the number of orders and the market participation rate in the relevant period, whether closing-price management was conducted, and the timing of the circulation of information, shows the formation of an artificial market price from the accumulation stage, and whether the defendant's use of each account is proved.
From the official text
Points at issue
[1] 증권거래법 제188조의4 제1항 위반죄 성립의 주관적 요건인 ‘거래가 성황을 이루고 있는 듯이 잘못 알게 하거나 기타 타인으로 하여금 그릇된 판단을 하게 할 목적’의 의미 [2] 시세조종 등의 금지에 관한 규정인 증권거래법 제188조의4 제2항에서 말하는 ‘매매거래를 유인할 목적’과 같은 항 제1호가 규정하는 ‘유가증권의 매매거래가 성황을 이루고 있는 듯이 잘못 알게 하거나 그 시세를 변동시키는 매매거래’의 의미 및 판단 방법
Unofficial English translation
[1] The meaning of 'the purpose of making others falsely believe that active trading is taking place or otherwise causing others to make an erroneous judgment,' which is a subjective requirement for establishing the crime of violating Article 188-4 (1) of the Securities and Exchange Act [2] The meaning and method of determination of 'the purpose of inducing trading' as used in Article 188-4 (2) of the Securities and Exchange Act, which prohibits market manipulation and the like, and of 'a trading of securities that makes others falsely believe that active trading is taking place or that causes the market price thereof to fluctuate' as provided in subparagraph 1 of the same paragraph
Summary of the holding
The official text publishes no summary of the holding for this decision. The quotation and factors in this record are copied verbatim from the points at issue; the evidence for each axis is taken from the points at issue, the order and the reasons.
Order
상고를 기각한다. 상고 후의 구금일수 중 90일을 본형에 산입한다.
Unofficial English translation
The appeal is dismissed. 90 days of the period of detention after the final appeal is counted toward the principal sentence.
Provisions referred to
[1] 증권거래법 제188조의4 제1항 [2] 증권거래법 제188조의4 제2항 제1호
Read 2026-10-16 · Cross-read 2026-10-16. All quotes matched against the official text. The Chinese-character placeholders the court used for anonymised parties are given in their Korean readings, and parenthetical Chinese-character glosses are omitted.
Every entry is published only after all quotes have been matched character by character against the official text, and audited by an independent second reading from a different model family across all eight axes. Both agreed axes and text-grounded interpretive divergences are recorded openly. The ledger is a research record, not an assessment of the court or advice on any matter.
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