Supreme Court: NH Investment Must Compensate JYP for Failing to Verify Optimus Fund

Supreme Court Finalizes Ruling on 3 Billion Won Loss for JYP

The Supreme Court has finalized a ruling that holds the selling company liable for compensation after it solicited customer investments in the Optimus Fund without properly verifying that the fund's assets matched what was stated in the proposal.

According to the legal community on May 13, the Supreme Court's third division (Presiding Justice Oh Seok-jun) upheld the lower court's decision, which partially ruled in favor of the plaintiff, JYP Entertainment, in an unjust enrichment lawsuit against NH Investment & Securities (hereafter NH). This case began when JYP invested 3 billion won in the "Optimus No. 28 Fund" at the recommendation of NH, only to incur losses.

At the time, Optimus claimed it was investing in stable public institution accounts receivable; however, it was later revealed that the fund actually purchased unlisted private bonds and invested in risky assets such as real estate development, stocks, and derivatives. As a result, JYP filed a lawsuit seeking to cancel the contract and recover its investment on the grounds of fraud and other issues.

The central issues in the trial were whether NH intentionally deceived investors or simply failed in its duty to provide adequate explanations. The first and second trials concluded that it was difficult to recognize NH as having committed fraud or unjustly solicited investments, and thus did not accept the claim for contract cancellation. However, the courts did acknowledge that NH violated its duty to protect investors. The ruling found that NH failed to properly verify suspicious aspects of Optimus's proposal and recommended the investment to customers without sufficiently explaining the associated risks.

The Supreme Court also found no legal error in this judgment and finalized the ruling. This decision reaffirms that financial distributors must not sell products solely based on the explanations from fund managers without independent verification, and that they have a responsibility to specifically inform investors of potential risks.