The Financial Supervisory Service opened a probe on Friday into suspicions that a group of investors manipulated stocks by spreading false rumors on North Korea.
The measure was taken after South Korean stocks plunged for several minutes after 2 p.m. during the trading session, hit by the rumors that there was an explosion at the Yongbyon nuclear complex in North Korea. The FSS also requested that police investigate the case.
Though the stock market stabilized before it closed, the brokerage sector suffered as the benchmark KOSPI dropped by more than 2 percent for several minutes.
Financial regulators raised the possibility that a group of fraudsters sought to rig stocks after investing in derivatives products, including the put option, launching an intensive inquiry into the case.
An FSS official said any manipulator will be subject to stern punitive measures.
The Korea Exchange also launched a review into possible stock manipulation.
The Defense Ministry said it had no knowledge of any explosion in North Korea.
On Dec. 27, the KOSPI was also briefly dragged down by rumors of the assassination of Kim Jong-un and China sending troops into Pyongyang.
On Jan. 5, there were rumors of a military coup in the North, with some circulating on Twitter. The rumors started on Weibo, the Chinese version of Twitter, and other Chinese-run websites.
By Kim Yon-se (email@example.com