Scholarship Foundation Investing in 'Foreign Exchange Transactions' Without Permission... Supreme Court Rules "No Refund"

[Asia Economy Reporter Heo Kyung-jun] A public interest foundation that suffered losses after investing without the approval of the competent authority filed a lawsuit demanding the return of funds entrusted to an investment brokerage firm but ultimately lost the case.

The Supreme Court's 3rd Division (Presiding Justice Noh Jung-hee) announced on the 8th that it upheld the lower court's ruling dismissing the unjust enrichment claim filed by A Scholarship Foundation against an investment firm.

In 2013, Foundation A entered into a foreign exchange arbitrage (FX margin trading) contract with Company B and entrusted approximately 500 million KRW of the foundation's principal assets held in a regular deposit account. Over the next six months, Foundation A conducted FX margin trades 4,084 times and terminated the contract in January of the following year, recovering only 181 million KRW.

FX margin trading is an investment method that pairs two currencies, such as the euro and the dollar, and involves predicting which currency's exchange rate will rise to execute buy or sell orders.

Accordingly, Foundation A filed a lawsuit against the investment brokerage firm, arguing that entrusting the principal assets without the approval of the competent authority violated the Public Interest Corporation Act and was therefore invalid, and that the amount lost in the investment should be returned as unjust enrichment. The foundation also claimed damages, asserting that the investment firm failed to fulfill its obligations under the Capital Markets Act, resulting in losses.

The first trial court ruled that the act of depositing the foundation's principal assets violated the Public Interest Corporation Act and was invalid, and thus the contract was void from the outset, requiring the return of benefits obtained without legal grounds. However, the appellate court found that the investment brokerage firm had little control or disposal power over the deposits received from the corporation, overturned the first trial's decision, and ruled in favor of the defendant.

The Supreme Court agreed with the appellate court's judgment, noting that after entrusting the funds, the foundation repeatedly set the investment items, prices, and quantities and directly placed orders, which the investment firm merely executed.

The Supreme Court stated that although the funds entrusted by Foundation A without the competent authority's approval were money the investment firm "should not have received," since the firm conducted trades under Foundation A's instructions and returned the entire balance, there was no "existing benefit" to be returned.

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