[Inside Chodong] Fierce Political Conspiracy Debate: Who Is Mocking the Public?

FSS Uncovers Allegations of Preferential Redemptions
Investigative Efforts Must Reveal the Substantive Truth
Do Not Dismiss as Political Oppression

Ham Yong-il, Deputy Director of Capital Market Accounting at the Financial Supervisory Service, is briefing on the 24th at the Financial Supervisory Service in Yeouido, Seoul, regarding the results of additional inspections on major investment management companies responsible for investor damages in Lime, Optimus, and Discovery funds.
[Image source=Yonhap News]

The Financial Supervisory Service (FSS), Democratic Party lawmaker Kim Sang-hee, and Mirae Asset Securities are embroiled in a controversy over allegations of 'preferential redemptions' related to the Lime Fund, which is escalating into a 'political conspiracy' debate rather than uncovering the truth.

FSS Governor Lee Bok-hyun announced upon his appointment in June last year that he would re-examine fund scandals including Lime, Optimus, and Discovery. Although suspicions arose that personnel from the previous government and ruling party were involved, many pointed out that the facts were not properly clarified. One year later, the FSS announced that it had newly uncovered embezzled funds amounting to 200 billion KRW related to the Lime Fund and allegations of preferential redemptions involving influential figures. Lime Asset Management returned large sums of money just before the suspension of redemptions to multi-term National Assembly member Mr. A (200 million KRW), listed company B (5 billion KRW), and central association C (20 billion KRW), among others.

Multi-term lawmaker Kim Sang-hee, who is serving her fourth term, was identified. Kim and the Democratic Party strongly opposed the allegations, calling them 'malicious political conspiracies.' They criticized Governor Lee for engaging in 'political maneuvering' ahead of the general election. Kim claims that she redeemed the fund upon Mirae Asset's recommendation and suffered losses, thus did not receive any preferential treatment. Mirae Asset stated that it had proactively responded by taking measures just before the large-scale suspension of redemptions in October 2019, having anticipated the Lime Fund losses in advance. Advising investors who subscribed to the fund to realize profits or cut losses is a normal role and a duty of a prudent manager.

However, there is substantial evidence to consider it preferential treatment. It is unusual that all 16 investors in Lime Martini No.4, in which Kim invested, were advised to redeem. There is reasonable suspicion that Mirae Asset or Lime aggressively pushed redemptions for so-called 'VIP management.' At that time, since any redemption application could immediately trigger a suspension, it was impossible for the distributor to inform customers to redeem. In fact, the prosecution revealed during investigations that Daishin Securities and former Lime Asset Management Vice President Lee Jong-pil tried to return investments to the family of former Prime Minister Kim Boo-kyum’s son-in-law and daughter, who had invested in the Lime Fund 'Tethys No.11.'

When Lime lacked funds to return investments to Lime Martini No.4 subscribers, it illegally used the company's own funds to meet the redemption deadline (one week after application). This is clearly preferential treatment. Could Mirae Asset, the distributor, have been unaware of this illegal redemption? The FSS decided to conduct additional inspections on the sales process to quell the controversy. Kim Jung-chul, lead attorney at Woori Law Firm, criticized, "The Lime scandal erupted after a show where, violating the Capital Markets Act for certain individuals, funds from other funds and personal money were used to redeem, while other customers were belatedly informed about redemption applications."

From the outset, the Lime Fund product in which Kim invested had more favorable redemption conditions compared to products subscribed to by the general public, deepening suspicions of preferential treatment. Unlike other Lime Funds that allowed redemption applications once a month, this product allowed applications twice a week. Also, unlike other products where investors received their money about a month after applying for redemption, this fund returned investments within five business days.

Democratic Party of Korea lawmaker Kim Sang-hee is holding a press conference on the 25th at the National Assembly to refute allegations of preferential redemption related to fund investment money involving herself. [Image source=Yonhap News]

Despite these circumstances, the FSS’s announcement of additional investigations is becoming a political issue. The Democratic Party denies it as a political conspiracy and argues that the issue should not be obscured. Over 4,000 victims lost about 1.6 trillion KRW and shed tears of blood. It is meaningful that the FSS’s additional inspections have belatedly confirmed hidden illegal activities. What is especially important is to reveal the substantive truth. If investigative activities aimed at this are labeled as political investigations or political oppression, wouldn’t that be mocking the public? It is crucial not to obscure the essence any further.

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