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| Korean Reinsurance Company CEO Won Jong-gyu, left, and KB Securities CEO Park Jeong-rim / Korea Times file |
By Park Jae-hyuk
Korean Reinsurance Company (Korean Re) has gone all out to avoid a loss from its investment in the JB Australia NDIS Fund, which has been involved with real estate investment fraud in Australia, due to a local borrower's breach of contract there.
According to an industry source, Monday, the Seoul-based reinsurance company had claimed damages Dec. 4 against KB Securities, the private equity fund's seller, and JB Asset Management, the fund's manager.
The Korea Federation of Community Credit Cooperative and the National Forestry Cooperative Federation, both of which are also among institutional investors that invested in the fund, joined the lawsuit to get compensation.
Korean Re had also referred KB Securities and JB Asset Management to the Seoul Southern District Prosecutors' Office, the source said.
JB Australia NDIS Fund was initially set up with an intention of investments in businesses related to the Australian government's housing policy for the disabled.
KB Securities attracted 326.5 billion won ($282 million) in investments between March and June ― 236 billion won from institutional investors and 90.4 billion won from individual investors and corporate bodies.
JB Asset Management lent the money to LBA Capital so the Australian borrower could buy homes, remodel them and receive subsidies from the Australian government for accommodating disabled people.
During KB Securities' on-site inspection, however, it was revealed that LBA Capital bought land ― not homes ― as the price of apartment buildings went up amid the overheating of the real estate market there.
Following the revelation, KB Securities and JB Asset Management took legal action against LBA Capital and retrieved about 85 percent of the investments.
KB Securities admitted it may not be able to retrieve the full amount of money it lent to LBA Capital. Its third-quarter business report read, "The management of the fund has been impossible due to the Australian local borrower's breach of contract, and there exists possibility of losing the principal."
In November, the brokerage gave individual investors and corporate bodies their money back.
However, it refused to do the same for institutional investors, saying, "Unlike individual investors, institutional investors have expertise in financial products and ability to take risks from investments."
As a result, Korean Re and the two institutions had no choice but to file a lawsuit to get their money back.
Sources said other institutional investors including IBK Insurance are preparing for legal actions against KB Securities and JB Asset Management.
It is known that ABL Life Insurance and Korea Investment & Securities are also among institutional investors that bet on the JB Australia NDIS Fund.
Both KB Securities and JB Asset Management made a public notice saying "We will counteract the lawsuit after consultation with our attorney."
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