[Exclusive] The Endless Nightmare of Italian Healthcare Funds... JB Asset Management Sued

Individual lawsuits are ongoing regarding the Italian healthcare fund scandal that caused investors losses of 150 billion KRW. Since redemptions have not been made even six years after the fund was established, domestic distributors and asset managers have effectively borne the losses.

According to the financial investment industry on the 10th, Hanyang Digitech, a KOSDAQ-listed company, recently filed a damage compensation lawsuit related to the 'JB Europe Healthcare Specialized Private Equity Fund No. 1' against JB Asset Management and others at the Seoul Southern District Court. The plaintiff stated, "We claim restitution of unjust enrichment due to improper solicitation and breach of explanatory duties by the distributor, and damages for illegal acts by the asset manager." Hanyang Digitech has classified its 1 billion KRW fund holdings as 'non-marketable debt.' It is unusual for asset managers to be included in investment damage lawsuits, which are typically directed only at distributors. The company said, "We proceeded with the lawsuit because fund redemptions have been continuously delayed," and added, "We are not participating in the class action lawsuit by investors."

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JB Europe Healthcare Specialized Private Equity Fund No. 1, created in early 2018, is one of 14 Italian healthcare funds sold domestically between 2017 and 2019. The Italian healthcare funds are products set up to invest in medical fee accounts receivable that Italian hospitals claim from local governments. The funds’ maturities ranged from December 2019 to October 2022, but redemptions were suspended due to difficulties in recovering the bonds. The total amount sold through sales channels such as Hana Bank exceeded 150 billion KRW. Banks reportedly downplayed the risk of loss by presenting the funds as government-guaranteed products, assuring investors that the investment principal could be recovered stably unless an Italian sovereign default occurred.

The government also intervened in June 2022 to mediate disputes between the industry and investors, but conflicts remain ongoing. The Financial Supervisory Service’s Financial Dispute Mediation Committee decided on a maximum compensation ratio of 80% for damages caused by incomplete fund sales. The FSS also judged that there were serious issues during the sales process. However, since 'contract cancellation due to mistake' was not applied, the compensation ratio was limited to 80%. Accordingly, victims demanding 100% compensation have filed complaints with the prosecution and police against seven distributors and asset managers, as well as securities firms involved in issuing derivative-linked securities (DLS) and total return swap (TRS) contracts. The prosecution conducted raids on KB Securities and Shinhan Financial Investment following the main distributor, Hana Bank.

Individual victims are pursuing both criminal complaints and civil lawsuits while awaiting court rulings. The Criminal Division 13 of the Seoul Southern District Court (Presiding Judge Myung Jae-kwon) sentenced Shin Mo, former deputy general manager of Hana Bank who led the sales of the Italian healthcare fund, to nine years in prison and a fine of 200 million KRW in December last year. The first civil trial hearing is scheduled for February 29 next month. Lawyer Lim Jin-seong of Hannuri Law Firm, representing the victims, said, "Since the fund is invested in very ambiguous and uncertain assets, it may take more than four to five years until redemption. Although the appeal trial is ongoing, meaningful results have already come out in the criminal trial, so I believe the civil trial will also have a positive outcome."

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