JINSUNG T.E.C., which signed up for a foreign-exchange derivative product similar to KIKO and suffered losses in the 100 billion won range, effectively won a final victory in its lawsuit against the seller, Woori Bank. With the Supreme Court ordering a fresh review of the statute of limitations for the damage claim, the damages Woori Bank must pay to JINSUNG T.E.C. are expected to increase.
On the 25th, according to financial industry officials and according to legal sources, the Supreme Court overturned the lower court's ruling in the damages lawsuit between Woori Bank and JINSUNG T.E.C. and remanded the case to the Seoul High Court. The bench remanded the case with the purport that the starting point for calculating the statute of limitations on the damages claim must be reconsidered.
In the first trial, the court found that "for damages that occurred before Nov. 22, 2013—three years prior to Nov. 22, 2016, when JINSUNG T.E.C. filed the lawsuit—the statute of limitations on the damages claim had expired." Accordingly, it recognized only part of the 89 billion won in damages sought by JINSUNG T.E.C. and ordered Woori Bank to pay 14.1 billion won. The appellate court accepted the first trial court's decision as is.
However, the Supreme Court said there was a problem with how the statute of limitations period for this damages claim was set and called for a new determination. If the limitations period is recalculated, the amount of damage will grow, increasing Woori Bank's payout.
JINSUNG T.E.C., an exporter of heavy equipment parts, entered into a won–yen currency option contract with a snowball structure with Woori Bank in Jul. 2007 for the purpose of hedging exchange risk. In a currency option product with a snowball structure, if the market exchange rate continues to rise above a certain level, the strike rate can fall sharply, increasing losses. If the exchange rate surges, massive losses can occur.
When the won–yen exchange rate rose in 2008 due to the global financial crisis, JINSUNG T.E.C. asked Woori Bank to come up with countermeasures. Woori Bank restructured the currency option contract with JINSUNG T.E.C. and entered into a "simple forward exchange contract" that transferred previously incurred losses. But as the won–yen rate kept rising, JINSUNG T.E.C. suffered losses in the 100 billion won range.
Afterward, JINSUNG T.E.C. filed a damages lawsuit of about 89 billion won against Woori Bank, saying it suffered losses from the currency option contract and the simple forward exchange contract concluded at the bank's recommendation.
A Woori Bank official said, "The contract in question was concluded in 2008, and we currently prohibit sales of currency options to general investors to protect financial consumers," adding, "Currently, over-the-counter derivatives are sold only through corporate-dedicated channels, and even for low-risk hedging products, we have strengthened investor protection by enhancing product explanations and implementing pre-call and post-call procedures to confirm what was explained."