SEOUL — Samsung Group, South Korea’s largest conglomerate, is currently under investigation for claims of insider trading. Senior executives within the group are alleged to have shared confidential information ahead of the impending merger between Samsung’s fashion arm, Cheil Industries, and the group’s construction and trading firm, Samsung C&T Corp.
On Friday, Kim Hong-sik, head of capital markets investigations at the state-run Financial Services Commission, informed members of the local press that Samsung was under investigation for allegations of insider trader. According to Yonhap News reports, sources at the Korea Exchange (KRX) said nine executive members of Samsung Group were alleged to have purchased between 40 billion and 50 billion won, or $34.5 million to $43.1 million at current exchange, worth of shares before the impending merger.
Neither Samsung nor KRX officials could be reached for comment.
Founded in 1938, Samsung has kept itself family-run since its beginnings. In South Korea, the group is known as a “chaebol” company, meaning a large conglomerate run by several generations of a “business family” or “wealthy clan.”
Its fashion division, Cheil Industries, is currently headed by Lee Seo-hyun, its president and the daughter of Lee Kun-hee, who is the son of Samsung’s founder and its current chairman.
Over recent years, Cheil Industries has amassed a large portfolio of local brands including labels like the normcore-focused 8 Seconds; preppy casualwear brand, Beanpole; lifestyle and fashion brand 10 Corso Como Seoul, and designer labels such as men’s wear brand Juun J. and Hexa by Kuho.
The division’s most notable recent project is Nonagon, a partnership with YG Entertainment, Korea’s largest entertainment firm, launched in 2014. Nonagon is an exclusive kpop-inspired brand promoted by Korean celebrities from groups such as boy band Big Bang and girl group 2NE1.
Founded in 1954, Cheil Industries was originally an affiliate of Samsung, and began as a textiles producer. Since then, it has grown exponentially and undergone a series of dramatic makeovers over a number of years. In 2013, Cheil’s fashion division was acquired by Samsung Everland, its amusement park and resort branch. In summer 2014, Samsung Everland renamed itself Cheil Industries.
In 2015, Cheil revealed plans to acquire Samsung C&T for $8 billion, a sum that U.S. hedge fund and shareholder Elliott Associates claimed was vastly undervalued. The division has undergone much criticism for its various upheavals.
Other critics allege that these mergers and changes are all part of a family secession plan to divide up the estate and make room for chairman Lee Kun-hee’s son Lee Jae-yong, who is vice chairman of Samsung Electronics, as the heir apparent to run the entire group.