"Discovery Fund Search and Seizure Illegal" Quasi-Appeal Accepted... Prosecution to File Re-Appeal

Rhyme·Optimus "Under Additional Investigation"
Also Focusing on Identifying Backers of Youngpoong Paper Mills

The prosecution has decided to file a rehearing appeal after the court partially accepted the quasi-appeal filed by the former Discovery Asset Management CEO Jang Ha-won's side, who argued that the seizure and search of legal advisory materials was illegal.

A representative of the Seoul Southern District Prosecutors' Office stated on the 5th, "It is not that we do not respect the court's judgment, but there are parts that are difficult to accept," explaining the decision.

In the course of investigating former CEO Jang and others for violations of the Act on the Aggravated Punishment of Specific Economic Crimes and the Capital Markets Act, the prosecution conducted a seizure and search of Discovery Asset Management's office on July 6 last year, confiscating two mobile phones of Jang and executives, electronic information stored on servers, external hard drives, and laptops.

Jang Ha-won, former CEO of Discovery Asset Management.
[Image source=Yonhap News]

However, on the 23rd of last month, Judge Jeong Seong-hwa of the Criminal Division 11 of the Seoul Southern District Court partially accepted the quasi-appeal filed by Jang's side. A quasi-appeal is a method of appeal to the court requesting cancellation or modification of a disposition related to detention, seizure, or return of seized items by a prosecutor or judicial police officer. If the court accepts a quasi-appeal regarding seized items obtained through a seizure and search, those items cannot be used as evidence in court.

At that time, Judge Jeong ruled, "Communication exchanged for the purpose of receiving legal advice can be refused disclosure by the lawyer or client," and "the prosecution infringed on Jang's constitutional right to receive assistance from a lawyer." He added, "It is illegal because electronic information beyond the scope of the seizure target was seized without a warrant."

Regarding this, a prosecution official said, "It is difficult to explain in detail, but the main grounds for the rehearing appeal are about two points, and we plan to appeal on some issues."

Seoul Southern District Prosecutors' Office.

The prosecution is also conducting additional investigations into three fund management companies?Lime, Optimus, and Discovery?that were involved in controversies over 'poor investigations.' The Financial Supervisory Service (FSS) established a dedicated task force (TF) in January last year and conducted additional inspections after suspicions of 'poor investigations' arose regarding the three management companies that caused large-scale redemption crises. New illegal activities were detected and reported to the prosecution, and additional investigation results were announced in August last year.

A prosecution official said, "Regarding Lime, Optimus, and other management companies, we have identified areas requiring further investigation and are currently reviewing them from multiple angles. The FSS has also notified the prosecution of new illegal acts, and since these cases involved controversies over poor investigations, we are examining whether any parts were missed during the previous investigations."

Regarding the 'Yeongpung Paper stock manipulation' case, a prosecution official said, "Investigations related to the masterminds are ongoing." The Yeongpung Paper case involved using over 330 securities accounts from October 2022 to October last year to place high-priced buy orders and other market manipulation orders, raising Yeongpung Paper's stock price and illegally gaining about 660 billion KRW. It is known as the largest single-stock price manipulation case.

On the 14th of last month, the Financial and Securities Crime Joint Investigation Division (Chief Prosecutor Ha Dong-woo) of the Seoul Southern District Prosecutors' Office arrested and indicted the ringleader Lee (54) on charges of violating the Capital Markets Act, while indicting two others involved in market manipulation and two accomplices who helped Lee evade arrest without detention. Since then, the investigation has focused on identifying who the 'mastermind' directing the stock manipulation is.

A prosecution official said, "The Yeongpung Paper case is a large-scale case involving many stakeholders in the market," adding, "There have been suspicions raised through the media that there might be a mastermind behind the actual market manipulation, and investigations related to this are ongoing. At this time, it is difficult to disclose detailed investigation information."

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