Prosecution Seeks 12-Year Prison Sentence for Jang Ha-won in 'Discovery Scandal'

[Image source=Yonhap News]

[Asia Economy Reporter Kang Nahum] The prosecution has requested a heavy sentence for Jang Ha-won, CEO of Discovery Asset Management (63), who was arrested and indicted on charges of causing investors to suffer damages worth 250 billion KRW by selling funds despite knowing the possibility of insolvency. CEO Jang is the younger brother of Jang Ha-sung, former Chief of Policy Office at the Blue House.

At the sentencing hearing held on the afternoon of the 14th at the Seoul Southern District Court Criminal Division 13 (Presiding Judge Lee Sang-joo), the prosecution requested the court to sentence CEO Jang to 12 years in prison on charges of violating the Act on the Aggravated Punishment of Specific Economic Crimes (fraud) and the Capital Markets Act.

Additionally, the prosecution requested 5 years imprisonment for Kim (42), head of Discovery’s Investment Headquarters, and 3 years imprisonment for Kim (36), head of the Operations Team. The corporation Discovery Asset Management was also fined 300 million KRW.

The prosecution stated, "Considering the extent of the damage in this case, CEO Jang’s crime is very serious," and added, "Kim, the head of the Investment Headquarters, was in charge of all practical matters, and Kim, the head of the Operations Team, was involved in all practical affairs."

According to the prosecution, CEO Jang is accused of resolving the redemption suspension crisis in August 2017 by establishing a special purpose company in a tax haven and purchasing loan receivables worth 55 million USD (approximately 72 billion KRW) at face value, after concerns arose about the insolvency of the underlying loan receivables during the sale of funds managed by a US asset management company starting from April 2017.

CEO Jang is also accused of selling funds worth 121.5 billion KRW until February 2019, despite anticipating losses in most of the loan receivables as of October 2018. Furthermore, he is charged with selling funds worth approximately 13.2 billion KRW and embezzling a significant amount of those funds, even after knowing that Brandon Ross, CEO of the US asset management company DLI, was reported to the Securities and Exchange Commission (SEC) in March 2019, making the recovery of investment funds difficult.

The Discovery funds were sold through Hana Bank, IBK Industrial Bank, Korea Investment & Securities, and others from 2017 to 2019. Subsequently, due to issues such as incomplete sales and poor management by Discovery, redemptions were suspended, and the outstanding unpaid balance was reported to be 256.2 billion KRW as of the end of April last year.

CEO Jang and others completely deny the charges. They claim, "The redemption suspension was caused by fraud by the US asset management company," and argue, "At the time of the initial fund setup, the defendants thoroughly reviewed the profitability of the entire underlying assets and the possibility of principal recovery, and established risk protection measures, so there was no fraudulent act."

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