In a case where a Woori Bank employee sold a high-risk Lime Asset Management fund product to a customer, resulting in losses, the Supreme Court ruled that only the employee, not the bank, is liable for damages.
The Supreme Court's Third Division (presiding Justice Lee Heung-gu) said on the 17th that on the 9th it overturned a lower court ruling that ordered both Woori Bank and Lee, a deputy branch manager at one of its branches, to pay damages in an appeal filed by a person surnamed Kang against Woori Bank and Lee, and remanded the case to the Seoul High Court.
Woori Bank signed a contract with Lime Asset Management and sold the funds on consignment. Lime Asset Management recruited investors by saying it could deliver a 5%–8% return when market interest rates were in the 1%–2% range. Then in Jul. 2019, suspicions arose that Lime Asset Management was managing returns through a rollover of fund money, and when investors en masse requested redemptions and a "fund run" occurred, Lime Asset Management declared a suspension of fund redemptions in Oct. 2019.
A financial regulator inspection found that Lime Asset Management knew the overseas fund it invested in was involved in a multi-level financial fraud (Ponzi scheme) but did not inform investors. The total damage amounts to about 1.6 trillion won.
In Mar. 2019, at Lee's solicitation, Kang invested 560 million won in a Lime Asset Management fund. When the fund run occurred, Kang recovered only 40% of the principal and did not get back 340 million won.
During the trial, Kang argued that Lee had said, "It is the same as the fund previously invested in, except the maturity is extended by six months, and there is no risk of principal loss," but 60% of the investment was allocated to a different fund than previously invested in. Kang also said Woori Bank knew the Lime Asset Management fund carried serious redemption risk but deceived Kang.
Woori Bank, on the other hand, said it could not have known at the time of the contract with Kang that the Lime Asset Management fund had deteriorated. It also countered that it fulfilled its duty to explain after assessing investment propensity based on Kang's answers.
In the first trial, the court ordered Woori Bank and Lee jointly to pay Kang 110.16 million won. The first trial court found that Woori Bank violated its duty to explain, and that Lee is liable for damages for soliciting investment without providing an accurate explanation to Kang. However, it said Kang also failed to properly review materials such as the product prospectus, and ordered Woori Bank and Lee to compensate only 65% of the amount Kang could not recover.
The appeals court also found both Woori Bank and Lee liable for damages. However, because investing in fund products inherently carries a risk of principal loss, it ordered Woori Bank and Lee to jointly compensate 157.92 million won, which is 90% of the amount Kang could not recover (175.47 million won).
The Supreme Court found that Woori Bank is not liable for damages and reversed and remanded the portion where the bank lost. The court held it could not be concluded that Woori Bank, even while knowing the likelihood of loss was very high, nevertheless solicited Kang to invest in the fund.
However, it found Lee liable for damages and dismissed the appeal. If, on remand, a ruling is finalized that Woori Bank has no liability for damages, deputy branch manager Lee is expected to pay 157.92 million won to customer Kang.