Anna Jiwon Park has been covering the politics at The Korea Times since the summer of 2024, when she joined the press pool for the Office of the President in Korea. Prior to that, she spent about five years reporting extensively on financial markets, regulatory authorities and the financial industry. She joined The Korea Times in 2019 after spending eight years as a broadcast journalist at Arirang TV, Korea’s leading global broadcaster, covering politics, defense and culture.
Financial regulator reinvestigates three infamous PEF fraud cases
The headquarters of the Financial Supervisory Service (FSS) in Yeouido, Seoul / Newsis
By Anna J. Park
By Anna J. Park
The Financial Supervisory Service (FSS) plans to relaunch an investigation next month into various banks and securities firms that sold fraudulent funds linked to Discovery Asset Management, according to industry officials, Sunday.
The reinvestigation into the sellers comes as the financial watchdog agency recently discovered new evidence of criminal allegations related to the funds' operation. FSS officials say the Industrial Bank of Korea (IBK), the largest seller of the funds since 2017, will be included in the investigation. The funds ended up wreaking havoc on over a thousand customers with the amount of damage reaching 261.2 billion won ($196 million) until their redemption was suspended in April 2019 amid mis-selling allegations.
The prosecution also launched a full-scale reinvestigation into the Lime fund crisis, another major fund scandal, which resulted in damage totaling 1.6 trillion won in 2019. Prosecutors said they began examining the case since May.
Prosecutors' investigation into the Lime case is in line with the FSS' announcement last Thursday that it confirmed additional allegations of embezzlement and irregularities involving three major funds created by Lime, Optimus and Discovery Asset Management.
In the new findings announced by the FSS, Lime misappropriated 12.5 billion won of investors' money and a portion of its own funds to pay influential figures who made investments, including members of the National Assembly, right before redemptions of the funds were suspended.
“By providing preferential redemptions to some investors, Lime transferred the losses to other fund investors,” the FSS stated.
Four-term lawmaker Kim Sang-hee stages a sit-in protest at the lobby of the FSS in Seoul, Friday. Courtesy of the office of Rep. Kim Sang-hee
Although the FSS did not reveal the name of the lawmaker who received the preferential redemption from the asset management fund, four-term lawmaker Kim Sang-hee of the main opposition Democratic Party of Korea staged a sit-in protest the day after the FSS' announcement. She denied allegations that she profited from preferential treatment by one of the funds.
Despite her denial, the prosecution's reinvestigation into the Lime scandal, which incurred a cumulative 1.6 trillion won worth of damage to 4,473 investors, is expected to ignite further allegations of influence-peddling among politicians. The prosecution is also expected to investigate allegations of embezzlement by Lime Asset Management amounting to about 200 billion won, which were revealed by the FSS last week.
FSS Governor Lee Bok-hyun speaks at an inauguration ceremony of the joint investigative unit on cryptocurrency crimes at the Seoul Southern District Prosecutors Office on July 26. Newsis
The FSS also revealed new allegations of bribery, embezzlement and fraud involving officials related to Optimus Asset Management. The Optimus fund scandal resulted in 508 billion won in damage to investors.
While investors have been compensated for some of the damage caused by the three fund scandals, the FSS said that the new revelations are aimed at getting to the bottom of the remaining suspicions and at supporting further compensation for victims.
Under the leadership of Governor Lee Bok-hyun, a former star prosecutor who focused on financial crimes, the FSS is actively collaborating with the prosecution and police. Since taking office last summer, Lee vowed to reinvestigate the three problematic fund cases.
Previously, the FSS kept a low profile and was reluctant to disclose investigation details until sanctions were confirmed and imposed. However, under Lee's leadership, the FSS has been showing a more active approach to matters of corruption and irregularities in the financial sector.