The Supreme Court ruled that NH Investment & Securities, which sold a fund product to JYP Entertainment that subscribed to the Optimus fund and failed to recover its investment, must pay 1.5 billion won.
The Supreme Court's Third Division (presiding Justice Oh Seok-jun) said on the 13th that on the 9th it finalized a lower court ruling ordering NH Investment & Securities to pay 1.5 billion won to JYP Entertainment in the final appeal of a lawsuit JYP Entertainment filed seeking the return of unjust enrichment against NH Investment & Securities.
NH Investment & Securities previously signed a consignment sales contract with Optimus Asset Management and sold private fund products. At NH Investment & Securities' recommendation, JYP Entertainment invested 3 billion won in December 2019 in a six-month-maturity Optimus private fund.
Optimus told NH Investment & Securities that the private fund generated revenue by investing in accounts receivable arising from construction projects ordered by government-affiliated and public institutions. But in June 2020, the so-called "Optimus scandal" occurred, and NH Investment & Securities informed JYP Entertainment that redemption of the fund had been postponed.
An inspection by the Financial Supervisory Service found that Optimus purchased bonds of unlisted companies with fund investment money, not accounts receivable of public institutions as initially explained, and that the funds were used for investments in risky asset such as real estate development projects and individuals' stocks and derivatives.
As a rule, accounts receivable of public institutions cannot be assigned and thus are effectively not subject to external investment. Optimus forged documents to deceive investors and sellers. Using this method, Optimus raised 1.2 trillion won from investors, causing 560 billion won in losses.
JYP Entertainment argued that the investment prospectus provided by NH Investment & Securities falsely stated as if investment in public institution accounts receivable was possible, so the fund investment should be canceled. It then filed suit, saying the 3 billion won invested by JYP Entertainment was unjust enrichment obtained by NH Investment & Securities and must be returned.
During the trial, NH Investment & Securities countered that it only brokered the inclusion of JYP Entertainment's funds into the Optimus private fund. It also said that even if the sale of the Optimus fund product to JYP Entertainment were canceled, NH Investment & Securities immediately remitted the investment to Optimus and therefore did not profit.
In the first trial, the court ordered NH Investment & Securities to pay JYP Entertainment the 3 billion won investment, statutory interest, and 90 million won in delay damages. The first trial panel said, "Investors do not enter into contracts with an asset management company (in this case, Optimus) but form legal relations by purchasing revenue securities from the seller," and added, "It is reasonable to view that a sales contract for revenue securities (funds) was formed between JYP Entertainment and NH Investment & Securities."
It further held that "NH Investment & Securities is obligated to pay the purchase price and statutory interest to JYP Entertainment as the return of unjust enrichment due to the cancellation of the sales contract for revenue securities."
In the second trial, the court ordered NH Investment & Securities to pay JYP Entertainment 1,509.87 million won and statutory interest. The appellate panel said NH Investment & Securities failed to provide JYP Entertainment with correct information about public institution accounts receivable and "is liable to compensate for damages arising from an unlawful act in violation of investor protection obligations under the Financial Investment Services and Capital Markets Act."
However, the appellate panel recognized 2,516.46 million won as the amount of damage for NH Investment & Securities, excluding 483.53 million won recovered by JYP Entertainment from the 3 billion won investment. It added, "By nature, investors must decide whether to invest in financial investment products under the principle of self-responsibility," and found NH Investment & Securities' liability for damages to be 60%.
The Supreme Court dismissed the appeal, saying the lower court's decision did not misunderstand the legal principles.