Police Launch Investigation into KB Securities over 80 Billion Won Loss in Private Equity Fund
Nikkei Index Option Investment Private Equity Fund Case
The police have launched an investigation into KB Securities, the seller of the 'Nikkei Index Option Investment Private Fund' that incurred losses worth 80 billion won in 2020.
According to the police on the 26th, the Gangnam Police Station in Seoul recently received requests for investigation and complaints from investors who suffered losses after investing in this fund. They have started an investigation by questioning securities firm officials on charges including fraudulent unfair trading under the Capital Markets Act. The fund was an option derivative product based on the Japanese Nikkei Index as the underlying asset.
![Seoul Gangnam Police Station [Image source=Yonhap News]](http://www.asiae.co.kr/news/img_view.htm?img=2023092619183490727_1695723514.jpg)
The victims stated in the complaint, "We invested 1.675 billion won by February 3, 2020, but after 25 days, not only the principal but also additional losses from option trading occurred, resulting in losses exceeding 100%." They also claimed that they invested believing the seller's assurance that the fund was safe, holding both the asset management company and the securities firm responsible. KB Securities had explained that there was a safety mechanism called a loss-cut, which allows immediate trading if losses exceed a certain level, making it safe. However, contrary to this explanation, it was effectively a 'risky product.'
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KB Securities and Winners Asset Management are engaged in a dispute over responsibility for the losses. KB Securities maintains that "the asset manager did not properly manage the risks," while Winners Asset Management counters that "the losses increased due to KB Securities' premature forced sales." In January, the court ruled in favor of KB Securities, stating that "the forced sales were lawful and the losses increased because the asset manager did not actively respond to the risks," in a first-instance judgment.
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