The prosecution on Sunday said it is tracking 59 accounts thought to have been used for bonds with warrant trading of CNK International, a mineral mining company accused of stock rigging and insider trading.

The investigators are now looking into whether the bonds were used by company chief Oh Deok-hyun as a tool to lobby politicians and businessmen.

According to Seoul Central Prosecutors’ Office, 30-50 people are suspected of holding such bond accounts, suggesting that a large group of people have been involved in the stock price-inflation scheme believed to have inflicted billions of won in losses on small shareholders.

The announcement came a day after the National Police Agency relieved a senior officer of his duty for reportedly receiving 100,000 shares of CNK in 2009 by investing 63 million won ($56,000) in the recapitalization of the company. He then sold them all in December 2010, soon after the Ministry of Foreign Affairs and Trade announced that the company had won a bid for a diamond mining project in Cameroon.

After the ministry’s announcement, the company’s stock price rose to 16,100 won per share from about 3,000 won. But the state report was revealed to have exaggerated the value of the deal and the stock price fell to 7,770 won.

Industry insiders believe about 13,000 investors saw an average 65 percent in losses as a result of investments made based on the government report. The Securities & Future Commission earlier this month filed complaints against Oh and other company management for unfair trade practices.

The Board of Audit and Inspection on Sunday said that Kim Eun-seok, relieved of his duty as an ambassador for energy and resources last Thursday, distributed the press release an hour before the Korea Exchange made the project public in 2010.

The disgraced official is suspected of having omitted the authorities’ warning that the estimate for the diamond reserves had been exaggerated.

Kim is also accused of insider trading where his close relatives allegedly purchased large amounts of CNK stock in advance of the announcement.

Speculators say investors in CNK may file a lawsuit against the Foreign Ministry over the scandal.

“The reports released by the ministry twice, on Dec. 17, 2010 and June 28, 2011, were revealed to be essentailly false. Therefore, the government may have to take responsibility for the investment craze following the announcements. We are studying the feasibility of the class action,” said independent lawmaker Jeong Tae-keun on his website.

The Foreign Ministry said Sunday that it will evaluate the integrity of its 220 high-ranking officials. The ministry had refused to conduct the evaluation despite strong recommendation from the Anti-Corruption and Civil Right Commission, claiming that their officials rarely work with the private sector and there is no room for corruption.

The adoption of the evaluation will strengthen the transparency of the organization, the ministry said.

By Bae Ji-sook and news reports  
(baejisook@heraldcorp.com)