IBK, Discovery Fund Subscribers to Receive 50% Principal Advance Payment

Yoon Jong-won, the new president of IBK Industrial Bank, is delivering his inaugural speech at the inauguration ceremony held on the 29th at the IBK headquarters in Euljiro, Jung-gu, Seoul. Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Kim Min-young] IBK Industrial Bank of Korea has decided to prepay 50% of the principal to investors of the Discovery Fund, who face the possibility of large-scale principal losses due to the fund's redemption suspension.

On the afternoon of the 11th, IBK held a board meeting at its headquarters in Euljiro, Jung-gu, Seoul, and resolved a plan for advance payment followed by subsequent settlement. The prepaid amount is 50% of the initial investment principal.

This plan allows customers to individually negotiate contracts with IBK to receive the advance payment first, and later, after the Financial Supervisory Service's Dispute Mediation Committee determines the final compensation amount and the final recovery amount of the suspended fund, the difference will be settled afterward.

The bank stated that the reason for the advance payment decision is to alleviate the inconvenience and difficulties customers face due to funds being tied up amid the prolonged redemption suspension.

An IBK official said, “We will clarify the facts through the ongoing Financial Supervisory Service inspection since the 8th and, based on this, resolve the issue reasonably according to relevant laws and regulations while doing our best to minimize customer damages. We also plan to actively cooperate with future procedures such as the Dispute Mediation Committee investigation.”

The Discovery Fund is a private equity fund planned by the domestic asset management company Discovery Asset Management. The US asset manager DLI operates the fund using investment funds raised from the domestic financial sector. IBK sold 361.2 billion KRW and 318 billion KRW worth of the Discovery US Fintech Global Bond Fund and the Discovery US Real Estate Senior Secured Bond Fund, respectively, between 2017 and 2019.

Last April, the problem surfaced when DLI was found to have falsified reports on actual returns and asset values and was charged by the US Securities and Exchange Commission. As the assets managed by DLI were frozen, domestic investors could not recover their investments. Currently, about 91.4 billion KRW (69.5 billion KRW in Fintech, 21.9 billion KRW in Real Estate) remains suspended from redemption.

The recent advance payment decision applies to 69.5 billion KRW of the Discovery US Fintech Global Bond Fund, which has been suspended for over a year.

On the 11th, in front of the Industrial Bank of Korea headquarters in Euljiro, Jung-gu, Seoul, members of the Industrial Bank of Korea Discovery Fund Fraud Victims Countermeasure Committee held a rally condemning the Industrial Bank of Korea. Photo by Kim Min-young

Earlier, on the 8th, the IBK Discovery Fund Fraud Victims Countermeasure Committee (Countermeasure Committee) held a meeting with IBK President Yoon Jong-won and demanded four things: ▲ full compensation advance payment (110% of principal including interest) ▲ holding a victim public hearing presided over by the IBK president ▲ guaranteeing opportunities to observe and speak at the IBK board meeting ▲ dismissal (severe disciplinary action) of two persons responsible for introducing and selling the fund. All demands were rejected.

Regarding the board's decision that day, the Countermeasure Committee stated, “Unilaterally deciding on advance payment followed by settlement at the board meeting without agreement from the fraud victims is not the correct solution to the problem,” and added, “We will fight until full compensation is received.” The committee held a protest rally from around 1 p.m., before the board meeting, urging IBK to acknowledge the fraudulent sales. They attempted to enter the headquarters in line with the board meeting time but were blocked by police and security guards on standby.

IBK plans to provide investors with detailed information on payment methods, timing, and procedures individually at a later date. An IBK official explained, “Requests from investors to observe the board meeting were not accepted due to concerns about hindering free decision-making at the board, but the demands of investor representatives were conveyed to the board without alteration.”

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