South Korea’s Financial Supervisory Service (FSS) announced plans to review the legitimacy of stock-backed loans taken out by former Socar CEO and founder Lee Jae-woong before his venture capital firm launched a tender offer for Socar shares.

Concerns have emerged that Lee’s firm used the tender offer to artificially support Socar’s stock price, allegedly to avoid margin calls triggered by the stock’s sharp decline. Investors who purchased shares on March 14th, 2025, without knowledge of these circumstances may face losses.

An FSS senior official told Maeil Business Newspaper on Sunday, “Since the stock price surged after the tender offer announcement following stock-backed loans, we will examine whether the process was appropriate.” The regulator is expected to focus on whether Lee initiated the tender offer to mitigate the risk of a margin call.

The tender offer price was set at 17,500 won ($12.06) per share, while Socar’s stock closed at 16,750 won on March 14th, up 17.87 percent from the previous day.

Venture capital firm SOQRI, where Lee is the largest shareholder, previously secured stock-backed loans from Jeju Bank, Pureun Savings Bank, and IBK Capital when Socar’s stock was trading between 18,000 and 20,000 won. However, the stock fell nearly 30 percent from that level just before the tender offer.

Pureun Savings Bank and IBK Capital had already requested additional collateral, and an additional stock-backed loan was taken out on March 13th, just one day before the tender offer announcement.

Lee defended the tender offer, saying that its purpose was to enhance corporate and shareholder value. In a Facebook post, he expressed regret that Socar had failed to meet market expectations for profitability and growth since its IPO and justified the move as a way to allow investors to recover their funds and increase shareholder value. However, Lee did not disclose that his venture capital firm had outstanding stock-backed loans at the time of the announcement.

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