Former Discovery Asset Management CEO Jang Ha-won received a final not guilty verdict regarding allegations of illegal fund management, increasing the burden on Lee Bok-hyun, the head of the Financial Supervisory Service (FSS), who directed the related investigation. The FSS had conducted further investigations into the Discovery Fund in 2023, even notifying the prosecution, putting effort into substantiating the allegations.
Based on the results of the additional investigation at that time, it was mentioned that a dispute resolution for fund investors would be re-implemented; however, there have been no further actions taken even after 1 year and 6 months.
According to the financial sector and the legal profession on the 14th, the Supreme Court's Second Division (Chief Justice Park Young-jae) recently confirmed the original ruling acquitting former CEO Jang of charges related to violations of the Act on the Aggravated Punishment of Specific Economic Crimes (fraud) and violations of the Capital Markets Act and Financial Investment Services Act. Executives from Discovery Asset Management who were tried on the same charges were also found not guilty.
Former CEO Jang was indicted for hiding the fact that most of the loan receivables were non-performing, leading to losses, and for selling products to over 370 investors, resulting in damages amounting to 134.8 billion won.
Former CEO Jang is currently undergoing other trials related to the Discovery Fund. This trial began in 2023 when the FSS reported the results of an additional investigation to the prosecution. Jang is the younger brother of Jang Ha-sung, the former South Korean Ambassador to China, who served as the policy chief in the administration of Moon Jae-in. The Discovery Fund was sold for 679.2 billion won by the Industrial Bank of Korea from 2017 to 2019.
The FSS formed a task force (TF) in January 2023 to conduct additional inspections of the Lime, Optimus, and Discovery Funds. The additional investigation into these funds was the inaugural remark of FSS head Lee Bok-hyun upon taking office. There were concerns raised within the ruling party that the Moon Jae-in government was conducting 'accommodative investigations' into individuals related to these funds.
In August of that year, the FSS announced that additional facts involving borrowing to pay back funds and embezzlement by executives of the asset management company had come to light during the operation of the Discovery Fund. The FSS turned over the results of the investigation to the prosecution and requested an investigation, and the prosecution indicted former CEO Jang for violations of the Capital Markets Act (fraudulent trading) and the Act on the Aggravated Punishment of Specific Economic Crimes (bribery), based on the FSS investigation results and its own investigation findings.
With the not guilty verdict for former CEO Jang, there are suggestions within the financial sector that the FSS may have conducted an undue additional investigation. At that time, concerns were raised internally within the FSS regarding the justification and basis for initiating additional inspections on matters that had already concluded administrative dispositions such as inspections and sanctions.
The FSS's mention of the possibility of re-implementing dispute resolution for Discovery Fund investors based on the results of the additional investigation is also receiving criticism. The FSS's dispute resolution committee acknowledged the allegations of incomplete sales of the Discovery Fund in May 2021, deciding that investors should be compensated for 40-80% of their losses. However, the FSS stated that it could proceed with the dispute resolution again because new violations had emerged from the additional investigation, but no follow-up actions have been taken to date.
An FSS employee noted, 'At that time, many comments criticizing the politicization of the FSS appeared on the anonymous employee bulletin board, and it seems that the additional fund investigation will remain as a dark chapter in the FSS's history.'