Yonhap, Lee Ji-un/AP
Park Dae-sung

Soothsayer Korean Financial Blogger Acquitted

April 21, 2009 02:24 PM
by Anne Szustek
Blogger Park Dae-sung was found not guilty on false information charges which came from his authoritative predictions about the national and global economy.

Blogger's Arrest "A Very Strong Censorship Tool"

Park Dae-Sung was acquitted of spreading false information in a South Korean court Monday. Deemed by authorities to be a threat to society and spreading false rumors, the blogger upstart was held in a South Korean cell without bail, facing a little-invoked telecommunications law that would have seen Park imprisoned for up to five years.

Presiding Judge Yoo Young-hyeon was quoted as saying by The Wall Street Journal, "Even if there was recognition that it was false information, he cannot be seen as having acted on purpose to harm public interest considering the situation at the time, including the special nature of the foreign exchange market."

In public, Park was arguably an unremarkable character. The 31-year-old Korean man is a graduate of a garden-variety junior college in a town south of Seoul, South Korea’s capital. He has spent the better part of his life single and alone, blogging about finance despite never having worked in the sector. As his father was quoted as saying by The Washington Post, "He can't even get a job."

But online, under the persona Minerva, named for the Roman virgin goddess of wisdom, his knack for economic soothsaying, aided with knowledge gleaned from financial publications, earned him the media credentials the “online oracle” and the “Internet president of the economy.”

Among his accurate predictions: the demise of 186-year-old U.S. investment bank Lehman Brothers and the steep weakening of the Korean won against the U.S. dollar.

But two of his 200-odd postings struck the South Korean government as potentially contentious: the first said the South Korean government had issued letters to financial institutions advising them to stop buying dollar reserves in a bid to bolster the won, according to the Washington Post. 

The second was a post that said the Finance Ministry was ending a foreign-exchange program for South Korean government entitities that were carrying debt in U.S. dollars abroad.

The South Korean government categorically denied those claims and was holding Park responsible for a $2 billion foreign-currency loss.

Since the “Minerva” case has emerged, several others, many of them with formal training or experience in finance, have claimed they have written under the Minerva screen name, although the government claims it has substantive electronic records pinpointing Park.

Meanwhile, however, others allege that the veracity of Park’s writings pierced through what they see as the growing opacity of the South Korean government, namely its window dressing on economic issues.

The government claimed, for example, that the post about letters to financial institutions was false, though currency traders have told reporters in South Korea "that the government did urge banks that day to refrain from buying dollars," wrote  the Post.

Opinion & Analysis: Park: Speech freedom victory or simple gadfly?

Park's acquittal is being heralded the world over as a triumph for speech laws. "Expanding freedom of expression without letting it clash with other democratic values and interests has always been a difficult issue," The Korean Times wrote in an opinion piece. "Most advanced democracies have moved toward guaranteeing free speech more than protecting other individual rights, such as reputation, and far more than those of states or governments."

The article also muses on what government would spend $2 billion in foreign reserves because of what a blogger wrote.

Some within the country see Park as a bumbling pest, however. The Wall Street Journal cites a Korean Times user by the name of "ecolove" who wrote: "Perhaps, you should think about your responsibility first before hailing to your rights. What did Minerva do to help others? Nothing good. I would call him a social parasite."

Background: Behavioral economics, Volkswagen short squeeze

The claim that Dae-Sung is responsible for the $2 billion loss, were it true, could have been an example of behavioral economics at work. Behavioral economics studies the psychological effects on the economy, including peoples’ propensity to spend and save, as well as how this can transpire on the financial markets.

One recent example of hysteria's potential for adverse effects was October’s short squeeze on Volkswagen stock. In the week prior to Oct. 28, Volkswagen shares soared 286 percent, closing at a record high €945 (about $1,198) on the 28th.

The reason VW shares traded so high was not a sudden surge in car sales, but rather rival carmaker Porsche’s heavy accumulation of shares, resulting in few shares available for normal market trading. As VW’s stock price rose, traders who had sold VW’s stock “short” were forced to buy shares to reverse their earlier transaction. A short sale occurs when a trader sells shares it does not own, hoping to re-purchase the shares later on at a lower price.

Porsche announced on Oct. 26 that it effectively controlled 74.1 percent of VW stock—holding 42.6 percent of the carmaker’s common stock and 31.5 percent in cash-settled options. This left less than 6 percent of Volkswagen stock as “float,” or stock not held by majority owners or insiders.
 This prompted a surge of VW stock purchases, driving up the price nearly fourfold. Porsche denied any wrongdoing and asserted that its announcement gave ample time for short sellers to back out of their positions.

Porsche in January gained indirect control of Volkswagen after purchasing more than 50 percent of the company’s shares.

Reference: Investing guide

Related Topics: Press freedom under fire in SE Asia; huge fraud from little-known trader

South Korea isn't the only country in Southeast Asia that seems to be cracking down on free speech. Nguyen Cong Khe, editor in chief of Vietnamese newspaper Thanh Nien and Le Hoang, who edited the Vietnamese publication Tuoi Tre, were fired just months after two of their reporters had gone on trial over their coverage of a major government corruption case. Vietnam’s Communist authorities have in recent months been tightening control of the media with a new policy to crack down on both state-run media and the blogosphere. Two other publications, Legality and Saigon Business People, lost their editors-in-chief in December.

Sometimes it's the most unexpected people that cause the biggest uproars. Last January, Société Générale, or SocGen, France’s second-largest bank, discovered that a single futures trader committed a “massive” fraud, resulting in a $7.1 billion loss for the bank. The trader concealed the money using “sophisticated and varied techniques.”
 The rogue trader turned out to be 31-year-old Jérôme Kerviel, a trader at the bank working at such a low-level position in the company that few suspected he was capable of such a feat. Kerviel made an unauthorized bet on European indices worth $50 billion—more than SocGen’s entire value.

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