A court has for the first time recognized the liability of a financial institution that sold a fund for damages in connection with the so-called "Hong Kong Gen2 Fund redemption suspension incident" that occurred in 2020.
According to legal sources on the 4th, the 11th Civil Division of the Seoul Southern District Court (Presiding Judge Kang Hee-seok) ruled partly in favor of the plaintiff on the 17th in a damages suit filed by domestic manufacturing company A against Shinhan Investment Corp.
The court ordered Shinhan Investment Corp. to pay A $5.58 million (about 7.25 billion won) in damages and delay damages. All other claims, including cancellation of the contract on the grounds of deceit or the return of trust funds due to the lapse of the maturity payment date, were dismissed.
The court viewed Shinhan Investment Corp. not as a mere seller but as the issuer of the derivative-linked securities (DLS) and found that it failed to fulfill its investor protection obligations accordingly. However, it found it difficult to conclude that A was deliberately deceived, and determined that Shinhan Investment Corp. was not obligated to repay the trust funds when the calculation of the fund's net asset value (NAV) was practically impossible.
In 2019, A entered into a specific money trust contract to invest in a DLS based on a fund managed by Gen2 Partners through Shinhan Investment Corp. The product was described as a structure that would generate returns by investing in stable assets such as domestic commercial bank bonds, but in 2020 the Gen2 manager notified a redemption delay due to a decline in asset value, halting the recovery of the investment.
Law firm Barun, representing A, said, "This outcome will serve as a strong legal basis to protect investors' rights in the many unresolved disputes related to the Gen2 incident going forward."
Shinhan Investment Corp. said, "This case was brought by some investors who did not agree to the private settlement plan we proposed," adding, "The compensation ratio recognized by the court remained at a level similar to the existing private settlement ratio." It added, "We are reviewing whether to appeal the decision."