South Korea’s Supreme Court upholds HSBC acquittal in short-selling case

South Korea’s Supreme Court on October 8 upheld the acquittal of HSBC’s Hong Kong unit in Seoul, ending the country’s first criminal case over alleged naked short selling. Prosecutors had accused the bank and employees of transactions worth about 15.8 billion won. The ruling leaves in place earlier courts’ finding that a knowing violation was not proved.

The Supreme Court dismissed the prosecution’s appeal, according to Yonhap News Agency, SBS News and ChosunBiz. SBS and ChosunBiz identified the deciding panel as the court’s Second Division, presided over by Justice Oh Kyung-mi. Their accounts describe a final ruling on the bank’s criminal liability, following acquittals at trial and on appeal.

What prosecutors alleged about HSBC’s trades

Prosecutors alleged that three people associated with HSBC’s Hong Kong unit sold short 318,781 shares in nine South Korean listed companies, including Hotel Shilla, between August and December 2021. SBS and ChosunBiz put the value at 15,784,680,000 won. The bank itself was also put on trial. The March 2024 indictment made this South Korea’s first criminal case involving alleged breaches of its naked short-selling rules, according to Yonhap and SBS.

In a covered short sale, a seller borrows shares before selling them, aiming to buy them back later. South Korea prohibits naked short selling, in which shares are sold short without first being borrowed. The allegation concerned the order of those steps: prosecutors said HSBC’s system allowed sales to proceed before the shares had actually been borrowed.

Why the earlier courts acquitted HSBC

The Seoul Southern District Court acquitted HSBC’s Hong Kong unit in February 2025. As reported by SBS and ChosunBiz, the trial court found insufficient evidence that employees knowingly breached South Korean rules. Yonhap reported that the court considered it likely the employees did not know the details of individual transactions because orders were placed automatically through the bank’s system.

ChosunBiz reported that the trial court found no evidence that traders on the Hong Kong stock-lending desk had conspired with bank executives while recognizing that the system’s use for Korean orders violated the law. Its account said the court viewed the employees’ work as potentially mechanical and noted that HSBC had used the system in markets elsewhere for years. These are reported findings about knowledge and intent, rather than a finding that the questioned trading sequence never occurred.

Prosecutors appealed, arguing that managers should be criminally responsible for operating a system they said inevitably produced naked short sales for the company’s benefit. The appellate court upheld the acquittal in September 2025. According to ChosunBiz, it said internal emails suggested HSBC had tried to comply with South Korean law. The bank’s review might have amounted to gross negligence, the court said in that account, but the evidence did not establish a conspiracy.

The Supreme Court’s October 8 decision closes that appeal and finalizes the lower court result. The available reports do not include the top court’s written judgment or its full reasoning, so the detailed explanations of how the courts assessed the system and employees’ knowledge come from accounts of the earlier decisions. The confirmed outcome is the bank’s acquittal in this criminal case.

What the ruling establishes

Lee & Ko, the firm representing HSBC, said the ruling ends the dispute over the bank’s criminal responsibility in the case and offers guidance on when naked short selling can lead to criminal punishment. That is the defense firm’s assessment of its significance. The reports establish the final acquittal, but do not establish a broader rule for every short-selling case.

The distinction matters for interpreting the outcome. Prosecutors alleged sales before borrowing; the courts, as described in the reporting, found proof of a knowing criminal violation insufficient. The cited reports do not establish any separate civil or regulatory outcome, a financial penalty or an effect on share prices. The Supreme Court’s full written reasoning would be needed to assess more precisely how its decision may apply beyond HSBC’s case.