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Sun, February 5, 2023 | 03:47
Non-banks
Lime Asset embroiled in US Ponzi scheme
Posted : 2019-12-30 17:00
Updated : 2019-12-30 20:22
Kim Bo-eun
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Lime Asset Management's headquarters at the IFC on Yeouido, Seoul / captured from Lime Asset Management's website
Lime Asset Management's headquarters at the IFC on Yeouido, Seoul / captured from Lime Asset Management's website

By Kim Bo-eun

Lime Asset Management will likely face an investigation over suspicions that it continued to sell fund options to investors despite allegedly being aware of the fact that the options invested in involved a U.S. hedge fund that engaged in fraud.

The U.S. Securities and Exchange Commission (SEC) on Nov. 26 revoked registration of the New York-based investment adviser International Investment Group (IIG) that managed the troubled hedge fund, stating it engaged in Ponzi schemes.

A Ponzi scheme refers to a fraudulent investment operation that generates returns for older investors by acquiring new investors.

IIG was charged with concealing defaulted loans in its hedge fund and selling at least $60 million in fake loan assets to other clients. The SEC imposed an asset freeze on IIG.

Lime, the country's largest hedge fund, had drawn up a trade finance fund amounting to 600 billion won, with funds from clients worth 243.6 billion won and loans from Shinhan Investment worth 350 billion won.

Lime invested 40 percent of the fund, or 240 billion won in the U.S. hedge fund called Structured Trade Finance Fund.

With the assets of IIG frozen, investors of the 240 billion are now set to lose the entirety of their investments.

While financial authorities declined to confirm, Monday, reports state they suspect Lime continued to sell the trade finance fund to clients knowing about the situation concerning the U.S. hedge fund. It is also suspected to have engaged in the same practice of paying investors returns with funds from new investors.

Lime Asset Management's headquarters at the IFC on Yeouido, Seoul / captured from Lime Asset Management's website
Lime Asset Management CEO Won Jong-jun bows in apology to investors for suspending redemption of funds, at a press conference at the IFC in Yeouido, Seoul, Oct. 14. / Yonhap

Authorities are likely to refer the case concerning the trade finance fund to the prosecution for further investigation, as it appears to go beyond violations of capital market regulations.

Investigators will likely face difficulties in investigating the case, as Lee Jong-pil, Lime's former chief investment officer who was in charge of the funds for which payments were delayed, has fled.

He did not appear for an arrest warrant review that was scheduled to be held at the Seoul Southern District Court on Nov. 15, concerning investigations for his involvement in managing the funds.

Shinhan Investment, which extended loans to Lime for investments in the U.S. hedge fund, is also likely to be investigated for suspicions that it manipulated yield rates of the fund.

Besides the investments in the trade finance fund, Lime has halted the redemption of funds amounting to 1.3 trillion won.

Authorities, which have been looking into the funds, will likely unveil results of the investigation next month and impose sanctions accordingly.


Emailbkim@koreatimes.co.kr Article ListMore articles by this reporter
 
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