Prosecution Indicts Jang Ha-won, CEO of 'Discovery Fund,' and Detains Him

Former Ambassador to China Jang Ha-sung's Brother, CEO Jang Ha-won
Accused of Selling 134.8 Billion KRW Fund Despite Knowing Underlying Assets Were Deficient
Two Employees of the Same Company Prosecuted Without Detention

[Image source=Yonhap News]

[Asia Economy Reporter Oh Gyumin] The prosecution has indicted Discovery Asset Management (Discovery) CEO Jang Ha-won (62) on charges including fund mis-selling and investment fund recycling.

On the 5th, the Financial Investigation Division 2 of the Seoul Southern District Prosecutors' Office (Chief Prosecutor Chae Hee-man) announced that they had indicted CEO Jang on charges of violation of the Act on the Aggravated Punishment of Specific Economic Crimes (fraud), fraud, and violation of the Capital Markets Act. Additionally, Discovery's Head of Investment Division A (42) and Operations Team Leader B (36) were also indicted without detention on the same charges.

The Discovery fund was sold between 2017 and 2019 through commercial banks such as Hana Bank and IBK Industrial Bank, as well as securities firms. Subsequently, due to Discovery's incomplete sales and poor management, redemptions were suspended, causing losses to investors.

CEO Jang established Discovery Asset Management in 2016 and managed the fund. He is also the younger brother of Jang Ha-sung, former South Korean Ambassador to China and former Chief Presidential Secretary for Policy at the Blue House. It is known that former Blue House Chief Policy Secretary Kim Sang-jo and former Bareunmirae Party lawmaker Chae Yi-bae, along with Jang Ha-sung and his spouse, also invested in the fund.

Jang and the other two are accused of deceiving victims into believing that investments made from October 2018 to February 2019 in distressed U.S. online peer-to-peer (P2P) loan receivables were safe and guaranteed high returns, selling approximately 134.8 billion KRW worth of the fund.

According to the prosecution, starting in April 2017, while selling a fund operated by the U.S. asset management company DLI (Direct Lending Investment), CEO Jang faced concerns over redemption suspension due to the underlying C loan receivables becoming distressed. In August of the same year, he resolved DLI's redemption suspension crisis by establishing a special purpose vehicle in a tax haven to purchase the receivables.

In October 2018, despite already anticipating a loss of about 40 million USD (approximately 52.3 billion KRW) on the C loan receivables, CEO Jang concealed this fact and sold funds worth about 121.5 billion KRW to investors. Ultimately, all sales proceeds were suspended from redemption.

Later, in March 2019, CEO Jang was aware of difficulties in recovering investments as the DLI CEO resigned after being reported to the U.S. Securities and Exchange Commission (SEC) on fraud charges. Nevertheless, he sold funds worth approximately 13.2 billion KRW and embezzled a significant amount.

The prosecution estimated the total sales amount of the funds sold by Discovery at 584.4 billion KRW, with redemption suspensions totaling 154.9 billion KRW.

The prosecution stated, "We have conducted an investigation following due legal procedures in a case with numerous victims and significant social impact, resulting in the indictment of CEO Jang. Although it was promoted as an investment in promising overseas lending platforms, it was a financial fraud case that caused irreparable losses to our citizens. We plan to maintain the prosecution to ensure strict punishment commensurate with the crime."

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