Daishin Securities Extinguishes Urgent $60 Million US Lawsuit Fire [Inside Stocks]

Daesin Finance Center

[Asia Economy Reporter Junho Hwang] Daishin Securities recently concluded a lawsuit worth 60 billion KRW filed in the United States. In the securities industry, where both the stock market and Daishin Securities' stock price have been on a continuous decline, this move is seen as having put out a fire in a hurry.

Daishin Securities announced on the 30th that the lawsuit filed by the U.S. bankruptcy court in February, demanding the return of profits due to fraudulent conveyance, was withdrawn following a settlement. The claim amount was up to 55 million USD (71.6 billion KRW), exceeding Daishin Securities' net profit of 68.9 billion KRW in the first quarter of this year.

At the time of the lawsuit filing, Daishin Securities stated it would "respond actively," but ultimately chose the rational option of a settlement. The settlement amount agreed upon by Daishin Securities was confirmed to be around 1.3 million USD (1.6 billion KRW). This decision appears to be based on the fact that under U.S. law, Daishin Securities would have to bear all costs related to the lawsuit regardless of winning or losing, making a victory potentially fruitless. A financial investment industry insider commented, "This was a frivolous lawsuit aimed at extracting a settlement," adding, "Considering the time and funds required for the lawsuit from Daishin Securities' perspective, even winning might not have been a real win."

Daishin Securities provided the pretext for the lawsuit when it invested in derivative-linked securities (DLS) linked to a mother fund (Direct Lending Income Fund, DLIF) managed by a U.S. asset management company (DLI Capital, Inc.) in 2017. Daishin Securities invested through normal procedures as with other investment products and completed the repayment and distribution of both principal and profits the following year. However, three years later, the CEO of DLI was indicted by the U.S. federal government and the U.S. Securities and Exchange Commission (SEC) on charges including manipulation of returns, which triggered the issue. The SEC filed a civil lawsuit, and in November last year, a California court initiated a 'fraudulent conveyance recovery claim' against beneficiaries who had received profits from DLIF.

Daishin Securities refrained from detailed comments but stated, "We have concluded a large-scale lawsuit that could have led to corporate value deterioration through a settlement." Industry insiders expect that KB Bank, Shinhan Bank, Korea Securities Finance, Golden Bridge, Korea Alternative Investment, JB Asset Management, and others involved in the lawsuit alongside Daishin Securities will also settle to conclude the matter.

Although Daishin Securities has literally put out the urgent fire, its net profit for the second quarter is expected to decline. Financial information firm FnGuide forecasts that Daishin Securities' second-quarter net profit will decrease by 71.7% compared to the previous year. This decline is attributed to the base effect from one-time gains of 400 to 500 billion KRW following the early sale completion of Nine One Hannam by its subsidiary Daishin FNI last year, as well as reduced commission income due to the sluggish stock market.

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