🚨 Stock Market Cleanup for KOSPI 5000: One Strike Out Era Begins for Market Manipulation

Today Korean Economic News | 2025.07.13

📌 "Play Games and You're Finished"… AI Monitoring and Joint Response Team to Stop Unfair Trading

💬 The government announced strong measures against stock manipulation and other unfair trading practices. Under the 'one strike out' rule, illegal traders can be kicked out of the market after being caught just once. The system will change from monitoring individual accounts to monitoring individual people, and will build real-time monitoring using AI technology. A joint response team will strengthen cooperation with investigation agencies, and fines can be increased up to 2 times. This is a key foundation for President Lee Jae-myung's 'KOSPI 5000' promise, aimed at improving market transparency and fairness to attract foreign investment and protect individual investors.

1️⃣ Easy to Understand

Strong measures have been announced to create a rule that 'stock manipulation = financial ruin' in Korea's stock market. From now on, being caught manipulating stocks just once can get you permanently banned from the market.

Stock manipulation means illegally making stock prices go up or down on purpose. For example, spreading fake news, using multiple accounts to fake trading volume, or buying and selling large amounts to move prices intentionally - these are all stock manipulation.

Until now in Korea, even when these illegal activities were caught, the punishment was weak, so some people treated it like a 'fun game'. After paying fines, some people would repeat similar actions. But now everything will change completely.

The key to the new system is 'one strike out'. Unlike baseball where you need three strikes to be out, with stock manipulation you're out immediately after being caught once. Specifically, if caught doing unfair trading, you're banned from working in the securities industry for 5 years, and you can't become an executive either.

Also, instead of monitoring by account like before, they will now monitor by person. For example, if a person named Kim Chul-soo has Account A, Account B, and Account C, all three accounts will be connected to analyze Kim Chul-soo's entire trading pattern. No matter how much someone changes accounts to trade, AI can track everything.

The reason the government is taking such strong measures is clear. To achieve President Lee Jae-myung's promise of 'KOSPI 5000', foreign investors must trust and invest in our market, but if stock manipulation is common, no one will trust our market.

In the end, this measure is not simply to punish bad people, but a long-term strategy to raise Korea's stock market to world-class levels.

2️⃣ Economic Terms

📕 Stock Manipulation

Stock manipulation is illegally making stock prices go up or down on purpose using artificial means.

• Includes spreading false information, price fixing, and market manipulation through large trades.
• This is a crime that hurts market fairness and causes losses to regular investors.
• Punished under Capital Markets Act with both fines and criminal penalties.

📕 Unfair Trading

Unfair trading means all forms of illegal financial trading that hurt market fairness.

• Includes insider trading, stock manipulation, false disclosure, and fraudulent trading.
• These are actions that abuse information advantages or disrupt market order.
• They reduce regular investors' trust and harm market efficiency.

📕 Administrative Fine

Administrative fines are economic penalties imposed to recover illegal profits from unfair trading.

• These are economic sanctions imposed separately from criminal punishment.
• Can be up to 3 times the profit gained from illegal activities.
• Aims for quick sanctions to restore market order and prevent repeat offenses.

📕 KOSPI 5000

KOSPI 5000 means the Korea Composite Stock Price Index reaching 5000 points.

• Current KOSPI index is around 2600 points, targeting about double growth.
• Needs market expansion, quality company listings, and foreign investment attraction.
• Important to achieve through qualitative growth, not just index rises.

3️⃣ Principles and Economic Outlook

✅ AI-Based Individual Monitoring System Innovation

• Let's analyze the changes from account-based to individual-based monitoring.

  • First, individual monitoring systems can fundamentally block stock manipulation. Previously, monitoring trades by account made it hard to catch manipulation using multiple accounts. For example, if one person created 10 accounts under family names or borrowed names to buy and sell specific stocks simultaneously, the old system couldn't tell if this was manipulation by the same person. But the new system analyzes IP addresses, trading patterns, deposit/withdrawal routes to identify the real trader. AI can catch suspicious trades in real-time based on learned patterns, making tracking possible from the moment manipulation begins.

  • Second, combining big data and AI technology dramatically improves monitoring accuracy. Previously, people had to manually check trading records and find suspicious patterns, but now AI analyzes all trades 24/7 in real-time. Machine learning algorithms learn from past stock manipulation cases to automatically detect similar patterns, and send immediate alerts when suspicious trades are found. Especially by combining social media monitoring, news analysis, and trading volume spike detection to calculate manipulation possibility in real-time. This creates a strong defense that makes it hard for manipulation groups to exploit technical gaps.

  • Third, prevention-focused proactive response becomes possible. Previously, investigations often happened after stock manipulation was already finished, but the new system can block manipulation in real-time while it's happening. When suspicious trading patterns are detected, the relevant accounts are immediately suspended, and additional trading is blocked until investigation is complete. This fundamentally prevents regular investors from being fooled by manipulated stock prices and suffering losses. Also, manipulation groups will likely not even attempt it due to high detection risk.

• The AI-based individual monitoring system represents a paradigm shift in market surveillance through technological innovation, and is expected to greatly contribute to advancing Korea's capital markets.

✅ Impact of One Strike Out System

• Let's examine how strengthened punishment systems will affect market participants' behavior and market order.

  • First, strong punishment maximizes deterrent effects against illegal activities. Until now, stock manipulation punishment was weak enough that many considered it 'worth trying once'. If you could gain billions in illegal profits while paying only hundreds of millions in fines, it was still 'profitable business'. But now, being caught once means punishment severe enough to end your economic life - 5-year ban from securities industry, executive disqualification, etc. For veteran securities professionals or large investors, this becomes a risk too dangerous to attempt. Economically speaking, the expected cost of illegal activity greatly exceeds expected profits, so rational actors won't even try.

  • Second, market participants' compliance awareness will greatly improve. Strengthened punishment systems raise awareness not just about stock manipulation but all forms of unfair trading. Securities companies, asset management firms, investment advisory companies and other financial firms must significantly strengthen internal control systems. They're expected to increase investment in employee education, trading monitoring systems, and compliance organizations. Individual investors will also avoid participating in illegal information trading or market manipulation. This will create positive cycles that raise the entire market's ethical standards.

  • Third, foreign investors' trust and capital inflow promotion effects are expected. One reason overseas institutional investors hesitated to invest in Korean markets was concerns about market fairness. It's hard to invest large amounts in markets where stock manipulation or insider trading frequently occurs. But with strong market monitoring systems and punishment systems established, Korean market credibility will greatly improve. This will lead to increased foreign investment funds, contributing to stock market activation and improved corporate funding conditions. Ultimately, this will positively impact the goal of achieving KOSPI 5000.

• The one strike out system is evaluated as institutional innovation that changes market participants' behavior patterns and market culture itself, beyond simple punishment strengthening.

✅ Building Market Infrastructure for KOSPI 5000

• Let's analyze the long-term impact of strengthened market fairness on stock market development and index growth.

  • First, improved market credibility will bring rerating effects. Korea's stock market has long suffered from undervaluation problems represented by 'Korea Discount'. Even companies with the same performance traded at lower prices than US or European companies. This resulted from complex factors including governance issues, lack of market transparency, and unfair trading concerns. But with strong market monitoring systems established and unfair trading eliminated, these discount factors will gradually disappear. As a result, even the same companies can trade at higher prices, leading to overall index growth.

  • Second, it will contribute to quality company listings and IPO activation. When market fairness is secured, good companies have greater incentive to list on stock markets. Until now, many quality companies avoided listing or chose overseas markets due to stock manipulation or unfair trading concerns. But with transparent and fair market environments created, more growth companies will choose domestic markets. Especially as innovative companies in future growth industries like IT, bio, and eco-friendly sectors list on KOSDAQ and KOSPI, both qualitative improvement and quantitative expansion of markets can be achieved simultaneously. This will become fundamental driving force for index growth.

  • Third, it will help expand individual investor market participation and establish long-term investment culture. Many individual investors have accumulated distrust of stock markets after experiencing losses from stock manipulation or unfair trading. But with fair market environments established, individual investors can also invest with confidence. Especially with young generations showing interest in stock investment, when market credibility is secured, more individual funds will flow into markets. Also, long-term investment culture based on corporate growth rather than short-term speculation will take root, improving market stability.

• Strengthening market fairness is a necessary condition for achieving KOSPI 5000, and through this, the foundation will be laid for Korean capital markets to leap to global levels.

4️⃣ In Conclusion

The government's strong measures to eliminate unfair trading will be a historic turning point for fundamental improvement of Korea's capital markets, beyond simple punishment strengthening. The 'one strike out' principle and AI-based individual monitoring systems are expected to work as powerful tools to root out stock manipulation and unfair trading that have been repeated.

Especially the transition from account-based to individual-based monitoring represents a paradigm change in surveillance through technological innovation. No matter how cleverly multiple accounts are used, with AI tracking in real-time, manipulation groups' operating space will greatly shrink.

Strengthened punishment systems will create strong deterrent effects against illegal activities. The realistic risk of permanent expulsion from the securities industry after one detection will be a stronger brake than any economic temptation. This will fundamentally change market participants' behavior patterns and establish compliance culture.

Most importantly, these measures are significant as core infrastructure building for President Lee Jae-myung's 'KOSPI 5000' promise. Only when market fairness and transparency are secured can foreign investors' trust be gained and quality company listings increase. This will lead to 'Korea Discount' resolution and rerating, becoming fundamental driving force for index growth.

However, consistent enforcement and continuous improvement are needed for system success. If strong systems are created but end with light punishment, or become loose over time, they become meaningless. Government and financial authorities must provide sufficient education and guidance for market participants to adapt to new order, while strictly punishing violations without exception.

If these measures succeed, Korea's capital markets can leap forward as markets with advanced-country level transparency and fairness. Only when the perception that 'stock manipulation = financial ruin' takes complete root in markets can the dream of KOSPI 5000 become reality.