'Litigation or Dispute Mediation'... Lime Investors Face Increasing Dilemma

[Asia Economy Reporter Park Jihwan] Investors in Lime Asset Management's redemption suspension funds, which are expected to incur losses of up to 1 trillion won, are struggling over lawsuits and dispute mediation.

According to the financial investment industry on the 18th, there are two main ways for investors related to the Lime redemption suspension incident to receive compensation. First is to use the dispute mediation of the Financial Supervisory Service (FSS). Dispute mediation has the advantage of taking less time than the prosecution investigation or court ruling, which is expected to take several years.

One investor affected by the Lime redemption suspension said, "The biggest issue in the current Lime incident is the time required," adding, "In the case of lawsuits, we believe it takes more time as well as costs, so we are pinning our hopes on the FSS dispute mediation." According to the FSS, 227 dispute mediation applications had been received as of the 16th. In response to the surge in dispute mediation applications, the FSS operates a dedicated Lime fund dispute window at the FSS Financial Civil Complaints Center.

However, dispute mediation becomes problematic if the sales companies such as banks and securities firms reject the mediation proposal. Currently, the sales companies maintain the position that they themselves are victims who were unaware of the Lime fund's insolvency. If the sales companies do not accept the dispute mediation proposal, investors have no choice but to opt for civil lawsuits. In this case, it may take up to five years or more.

There is also the option of choosing litigation immediately. In fact, some investors believe that although the financial authorities discovered Lime's illegal activities during the inspection of Lime Asset Management conducted last year, they did not inform the market or issue warning messages, which exacerbated the current situation. For this reason, rather than trusting the financial authorities' dispute mediation process, they prefer to receive a court judgment as soon as possible.

The key issues in the Lime incident handled by the financial authorities' dispute mediation and court lawsuits are "incomplete sales" and "contract fraud." In both dispute mediation and lawsuits, claims for damages due to incomplete sales are likely to be accepted based on investors' assertions, but the compensation amount is expected to be less than half of the investment amount. Actual compensation also requires the liquidation or redemption of the fund as a prerequisite, so it may take considerable time.

On the other hand, if "fraudulent acts" are proven in the FSS investigation or lawsuits, it corresponds to contract cancellation, and investors can receive all their invested funds back. In this case, investors can expect a resolution 2 to 3 years faster than when recognized as incomplete sales.