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Opposition Suspects Political Corruption in Hedge Fund Scandals

#Hot Issues of the Week l 2020-10-18



Lawmakers accused the Financial Supervisory Service of failing to prevent controversial hedge funds from freezing withdrawals of massive investments and causing more than two trillion won in financial losses. At the National Assembly audit of the financial watchdog, the main opposition said collusive ties between officials, including a former presidential aide, and the now-defunct asset management firms led to the massive financial scandals.

[Nat'l Assembly audit of Financial Supervisory Service (Oct. 13)]

Amid financial fraud investigations, the operations of 520-billion-won, or 430-million-dollar, hedge fund Optimus Asset Management were suspended in June this year, causing losses to one-thousand-166 individuals and institutional investors. 

At the parliamentary audit of the nation's financial watchdog on Tuesday, main opposition lawmakers alleged that Optimus' corrupt ties with government and ruling party officials led to lax supervision and the massive financial scandal.

[Rep. Yoon Jae-ok - People Power Party (Korean/English translation)]

"Mr. FSS Governor, Lime and Optimus assets are similar in that presidential officials are involved in the case. How would you respond to allegations that the supervisory function of the FSS failed due to the involvement of presidential officials?"

Opposition lawmakers raised allegations that a presidential official, with her spouse working for the hedge fund, intervened in the supervision of the firm before her resignation from the top office earlier this year.  

Financial Supervisory Service Governor Yoon Suk-heun called it groundless accusations. 

[Financial Supervisory Service Governor Yoon Suk-heun (Korean/English translation)]

"While carrying out our supervisory duties, we are not influenced by [the presidential office] by any more than required by work or the law. There is nothing to worry about."

Also mired in a political controversy is Lime Asset, Korea’s once largest hedge fund, which suspended redemptions amid a probe into its investments earlier this year.  

In a recent court hearing for the one-point-six trillion won scandal, a former official of the hedge fund testified that he gave 50 million won to then presidential senior secretary for political affairs Kang Ki-jung. While filing charges against the fund manager, Kang said he never received any money.

[former presidential senior secretary for political affairs Kang Ki-jung (Korean/English translation)]

"Receiving 50 million won at the presidential office cannot occur if people think about it. I never received any money."

The main opposition People Power Party demanded a special investigation into the financial scandals, saying Justice Minister Choo Mi-ae cannot be trusted. 

President Moon Jae-in on Wednesday ordered his office to actively cooperate in the prosecution's investigation into ruling camp figures' alleged involvement in the hedge fund scandals.

According to presidential spokesperson Kang Min-seok on Wednesday, Moon stressed to his aides that nothing should be off limits to the prosecution's investigation.

Following the president's orders, the top office plans to submit relevant records upon request.

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