'Discovery Incident' Jang Ha-won Denies Charges Again in Second Trial: "I Am Also a Victim"

"No Intent to Deceive Victims... It's Not Fraud"
"I Didn't Know the Company's True Nature at the Time... I Apologize"

[Image source=Yonhap News]

[Asia Economy Reporter Yoo Byung-don] Jang Ha-won, CEO of Discovery Asset Management (62), who is accused of causing damage worth several hundred billion won due to the suspension of redemptions in private equity funds, has denied all charges in his second trial as well.

The Criminal Division 13 of the Seoul Southern District Court (Chief Judge Lee Sang-joo) held the second hearing on the 25th at 3 p.m. for Jang, who was indicted while in custody on charges of fraud under the Act on the Aggravated Punishment of Specific Economic Crimes, fraud, and violation of the Capital Markets Act. The hearing also included A (42), head of Discovery’s investment division, and B (36), head of the management team, who were indicted without detention, as well as the corporation.

At the trial, Jang’s defense attorney stated, "The prosecution’s allegations have not been proven and are contrary to objective facts," adding, "We deny all the criminal charges in this case." He continued, "We sincerely apologize for the losses suffered by many victims, but these results were completely unexpected by the defendants, who were themselves deceived by an American company and defrauded."

Regarding accounting manipulation, the defense argued, "At the time, the true nature of the American company was unknown, and until the incident broke out, it was generating annual returns of over 10%. The defendant also sensed the risk after reading foreign news articles and conveyed through Hana Bank the intention to cancel fund sales, but the bank refused," they claimed.

Concerning suspicions that the redemption suspension was foreseen and that a 'Ponzi scheme' was conducted, the defense explained, "The principal and interest of bonds are liabilities, and the investment amount is an asset," describing it as "a normal cash flow." They also denied allegations that Jang’s older brother, former Ambassador to China Jang Ha-sung, was involved in the incident, stating, "There have been repeated mentions of a special relationship, but Jang has never said that his brother is at the Blue House."

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

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

Jang and two others are accused of deceiving victims by selling approximately 134.8 billion won worth of funds from October 2018 to February 2019, claiming that investments in distressed U.S. online peer-to-peer (P2P) loan receivables guaranteed high returns and were safe, despite the poor condition of the assets.

[Image source=Yonhap News]

According to the prosecution, from April 2017, while selling funds operated by the U.S. asset management company DLI (Direct Lending Investment), Jang resolved DLI’s redemption suspension crisis in August of the same year by establishing a special purpose vehicle in a tax haven and purchasing the underlying C loan receivables, which were deteriorating.

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

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

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

In July last year, as investors’ complaints of damages continued, the police began investigations, including imposing a travel ban on Jang and conducting raids on the selling banks.

On June 8, the court issued an arrest warrant citing concerns over evidence destruction and flight risk, and the prosecution indicted Jang on the 4th of last month.

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