Securities-related Class Action for Tong Yang Networks
Tong Yang Networks Inc. (Tong Yang) illegally supported its affiliates such as Tong Yang Leisure facing insolvency crisis by purchasing CPs(commecial paper) issued by the affiliates. Nonetheless, Tong Yang’s auditor, Samil accounting firm, failed to find its illegal support and gave unqualified opinion in the audit report for the fiscal year of 2012. SFC(Securities & Futures Commission), through investigation, found out Tong Yang’s illegal support in the amount of 466.8 billion won from September 2011 and imposed penalties of 30% of additional payment to Damages Fund and two years of restriction of audit for Tong Yang on Samil.
Tong Yang, which had sound financial structure with good operational performance, went through an abrupt bankruptcy process in October 2013 as its affiliates became bankrupt. Upon this abrupt bankruptcy, Tong Yang’s shares plummeted to the level of 2,000 won which has been going for 5,000 won until April 2013, and thus investors of Tong Yang suffered an enormous loss from this collapse. This case is of typical accompanying insolvency by illegal support to affiliates resulting in minority shareholders’ losses.
Thus, Hannuri Law, representing the shareholders of Tong Yang who suffered from Samil’s audit failure, filed this suit against Samil, and this 8th securities-related class action since the introduction of the Securities-related Class Action Act in 2005 would the meaning of establishing audit responsibility of accounting firms regarding conglomerate’s illegal support to its affiliates.