[Asia Economy Reporter Koh Hyung-kwang] The Yeouido securities market is once again in turmoil as securities firms and asset management companies face prosecution raids over the 'Lime scandal.' The atmosphere is even more unsettled following last year's multiple raids and special judicial police (SJP) investigations related to former Minister of Justice Cho Kuk's allegations and insider trading by current securities analysts. All securities firms are on high alert amid concerns that the investigation may expand to other securities firms that sold Lime funds.
According to the financial investment industry on the 20th, prosecutors conducted raids yesterday on Lime Asset Management and Shinhan Financial Investment, both headquartered in Yeouido, Seoul. It is reported that they seized not only computer hard disks and ledgers but also total return swap (TRS) contract documents related to the trade finance funds sold by Lime Asset Management and Shinhan Financial Investment, messenger records of the staff in charge, and various internal materials related to Lime's fund management.
The background of the sudden raids by prosecutors is that investors who suffered huge losses from Lime funds filed complaints against Lime and Shinhan Financial Investment officials on charges of fraud. Lime Asset Management and Shinhan Financial Investment are suspected of hiding losses caused by the default of a U.S. hedge fund invested in by the trade finance fund in November 2018, manipulating returns, and continuing to sell the fund. The funds whose redemption was postponed by Lime Asset Management amount to about 1.6 trillion won, with the money of 4,035 individual investors tied up.
The raid, which started around 10 a.m., reportedly continued intensively until after 10 p.m. Some officials of Lime Asset Management and Shinhan Financial Investment are said to have been subject to travel bans.
This is not the first time securities firms have undergone raids. Following multiple raids last year related to allegations surrounding former Minister Cho and the Samsung Biologics accounting fraud case, and investigations by the capital market SJP into insider trading by current securities analysts in the second half of the year, the securities market atmosphere was literally cold. The financial investment industry is disheartened as securities firms and asset management companies face raids again on charges of fraud before last year's wounds have healed. An industry insider lamented, "With the fund redemption suspension causing incomplete sales issues and now being embroiled in prosecution investigations, how could outsiders view the securities market favorably? Fundamentally, it is painful that customer trust in financial companies has been broken."
The securities industry is tense, fearing that the prosecutors' raids may expand to other securities firms that sold Lime funds, such as Daishin Securities, Mirae Asset Daewoo, NH Investment & Securities, Shin Young Securities, and Yuanta Securities. A securities firm official said, "Until the announcement of the redemption suspension last year, we did not expect the Lime scandal to become such a serious issue. After seeing the prosecutors' sudden raids, all other securities firms are also on edge."
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