Lime Fund Redemption Crisis Lawsuit Battle Intensifies

Law Firm Gwanghwa Submits 35 Proxy Complaints Today
Dozens of Online Cafe Participation Requests Rising Daily

[Asia Economy Reporter Park Ji-hwan] Victims of the Lime Asset Management fund redemption suspension are gearing up for full-scale litigation. This is due to concerns that the recovery rate from the accounting audit of the two suspended master funds is only in the 50% range, and that if securities firms receive their invested funds first, individual investors' losses could increase further.

On the 12th, according to the financial investment industry and legal circles, the law firm Gwanghwa submitted a complaint to the Seoul Southern District Prosecutors' Office on behalf of 35 investors who suffered damages ranging from 100 million to 1 billion KRW due to the 1.6 trillion KRW Lime redemption suspension. They claim that financial companies focused solely on sales without properly explaining the risks of the products, thereby committing 'violation of the Capital Markets Act' and 'fraud under the Act on the Aggravated Punishment of Specific Economic Crimes.' Previously, investors who had already filed complaints against the asset management and sales company executives have expanded the scope of their complaints to include private bankers (PBs) and other frontline sales personnel who directly sold the products.

The number of investors joining the lawsuits is expected to increase rapidly from this month. On the Lime Asset Management redemption suspension victims' online community, dozens of posts expressing the desire to participate in the litigation are being posted daily. One victim who suffered from the Lime fund redemption suspension said, "The recovery rate announced by Samil Accounting Corporation is based on the end of October last year, but the stock prices of the companies in which Lime invested through convertible bonds have since dropped to one-third of that level. To recover even part of the principal, criminal lawsuits or contract termination lawsuits are inevitable."

The spark for this collective litigation movement was ignited by Samil Accounting Corporation's Lime fund accounting audit report. In the report, Samil Accounting stated that the expected recovery rates for the two suspended master funds, 'Pluto FI D-1' and 'Thetis No. 2,' are approximately 50-65% and 58-77%, respectively. As of the end of October last year, the fund valuations were 937.3 billion KRW for Pluto and 242.4 billion KRW for Thetis. Applying the expected recovery rates to the fund valuations, Pluto could recover between 468.7 billion and 609.2 billion KRW, and Thetis between 140.6 billion and 186.6 billion KRW.

In particular, the litigation movement expanded further after Lime Asset Management recently delivered a customer notice to fund distributors stating, "When the total return swap (TRS) contract ends, the securities firm providing the TRS settles first from the total returns, then passes the remaining returns to the fund." This acknowledges that securities firms take funds on a senior priority basis, which would lower the recovery rate for investors. Assuming a 50% recovery rate on the total suspended redemption amount of approximately 1.67 trillion KRW, securities firms could first recover 680 billion KRW out of 835 billion KRW. In this case, the actual amount returned to customers would be reduced to around 160 billion KRW.

Currently, the prosecution is also accelerating investigations into Lime-related cases. It is known that the prosecution is focusing on investigating whether there was manipulation of returns to cover fund redemptions and any illegal activities during the investor recruitment process.

This content was produced with the assistance of AI translation services.