[Q&A] Concerns Over Full Loss of Optimus 500 Billion Won... Difficulty in 100% Compensation of Investment Principal

Victims of the Optimus Fund NH Investment & Securities held a protest rally on the 20th in front of the National Agricultural Cooperative Federation in Jung-gu, Seoul, demanding compensation for damages caused by the Optimus Fund. Photo by Kim Hyun-min kimhyun81@

[Asia Economy Reporter Park Ji-hwan] The financial authorities' investigation into Optimus Asset Management revealed that CEO Kim Jae-hyun embezzled hundreds of billions of won of fund money and invested it in stocks and other assets under his personal name. It was found that the company deceived investors by claiming to invest in public institution sales receivables but actually used the funds for risky asset investments and fund recycling. So far, the size of the fund with redemption delays is 240 billion won, and it appears inevitable that the remaining approximately 280 billion won of funds will also face redemption delays. The Financial Supervisory Service (FSS) announced the interim inspection results of Optimus Asset Management on the 23rd.

The following is a Q&A with Kim Dong-hoe, Deputy Director of Financial Investment at the Financial Supervisory Service, and other FSS officials.

▷What is the likelihood of recovering the 200 billion won of Optimus fund money whose investment destinations have not yet been identified? And if the fund money cannot be recovered, will investors lose their money entirely?

=We have almost completed measures such as bond preservation and provisional seizure on the currently invested assets. The due diligence on the assets themselves will take about two months. Due diligence is to verify the actual existence of the invested assets, but it has not yet been completed. The amount of loss on the invested assets has not been finalized either. Based on what has been confirmed so far, the possibility of recovering the fund assets is considered quite low, or even if recovered, the value is expected to be low. In principle, investment losses on fund money translate directly into losses for investors. However, the issue of incomplete sales of the fund must be considered. Since the sales company sold the fund to investors as a stable fund, it is expected that compensation to investors will be addressed through good faith principles such as advance compensation.

▷When did CEO Kim Jae-hyun start using the investment funds for personal purposes? NH Investment & Securities sold a large amount in June, while other sales companies were reducing sales. Was there pressure to meet performance targets?

=During the inspection process, it was partially confirmed how CEO Kim Jae-hyun used the funds personally. Besides using hundreds of billions of won for personal stock and derivatives trading, there were also personal uses such as real estate. We have shared related materials with the prosecution. The prosecution is currently conducting further investigations on this matter. Regarding the sharp increase in sales by NH Investment & Securities, the investigation is ongoing to determine if there were any circumstances such as incomplete sales.

▷Unlike the Lime Asset Management incident, you mentioned that instead of establishing a new management company for fund transfer procedures, the affiliated asset management company of the sales company will be used. Will the fund be transferred to NH Investment & Securities’ affiliated asset management company?

=We are considering a simple structure that allows the fund to be transferred to NH Investment & Securities, which sold the most. However, it has not yet been finalized whether NH Investment & Securities will ultimately take over the fund transfer.

▷You mentioned that fund money flowed to about 60 investment destinations. Have you completed inspections on who the representatives of these 60 corporations are, and whether the money still exists in these corporations?

=Private equity funds involve private areas such as investment target selection and contract relationships. From the financial authorities’ standpoint, even though the incident occurred, there are limits to clarifying the substance of the case through internal inspections. The substance of the case will likely be revealed through criminal investigations by the prosecution or other compulsory investigative methods. It is difficult for the financial authorities’ investigation to deeply probe how the actually invested money is being used on that side.

▷Have any illegal acts such as embezzlement by other executives besides CEO Kim Jae-hyun been confirmed?

=No stock trading or similar activities by other executives besides CEO Kim Jae-hyun have been identified. I understand that the prosecution is currently investigating this matter.

▷Is 100% compensation possible for some funds like in the Lime Asset Management case?

=Since the inspection results have not been released, it is difficult to definitively say 100%. Dispute resolution will proceed based on conditions such as asset due diligence and damage confirmation through various dispute resolution methods.

▷Whether NH Investment & Securities made improper solicitations to investors seems to be a key issue for victims. How is the investigation into improper solicitation progressing?

=Currently, an investigation into NH Investment & Securities is underway. Regarding sales, the inspection is checking whether the sales company had reasonable suspicion when bringing in the product. Generally, documents and recordings used according to the incomplete sales inspection manual are also being reviewed. Broadly, it involves examining the preparation of materials at the head office level, product screening, and whether incomplete sales occurred during the customer sales process.

▷Has it been confirmed whether the Optimus fund actually invested in public institutions?

=Based on our verification, there was no investment in public institution sales receivables at all. In early 2018, there was an attempt at the idea level to create a product that invests in public institution sales receivables.

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