First Trial for Six Including KB Securities Team Leader Kim for Capital Markets Act Violation
KB Securities "Prosecutor's Artificial Manipulation, Interpretation in Desired Direction"
[Asia Economy Reporter Yoo Byung-don] KB Securities employees indicted for involvement in the sale and circular financing of Lime Asset Management funds, which caused damages amounting to approximately 1.6 trillion KRW, denied all charges at their first trial. The KB Securities corporation also fully denied the allegations of negligence in its duty of care and supervision.
The Criminal Division 14 of the Seoul Southern District Court (Presiding Judge Kim Dong-hyun) held the first hearing on the charges of violation of the Capital Markets Act against KB Securities on the 21st.
At the trial, KB Securities denied all charges. A lawyer representing KB Securities stated, "We need to review the evidence records in detail, but for now, we deny the allegations."
Five KB Securities employees and the corporation are accused of violating the Capital Markets Act by concealing and selling Lime funds that, contrary to the proposal stating investment in 'A-rated high-quality corporate bonds,' were actually invested in unrated private bonds, despite being aware of this fact in March 2019.
Kim, team leader of KB Securities' Delta Solutions Department, was also charged with embezzling approximately 400 million KRW in fees over three occasions through advisory contracts between the companies targeted by Lime funds and a corporation in which he is the actual shareholder (violation of the Act on the Aggravated Punishment of Specific Economic Crimes - fraud). The prosecution arrested and indicted Kim, while the other employees and the vice president of Lime Asset Management were indicted without detention.
It is reported that all of them remain in their current positions within KB Securities, with only minor changes in their roles.
Some employees also set up OEM (Original Equipment Manufacturer) funds that caused losses to Lime fund investors. The prosecution believes that when the Lime fund, which received total return swap (TRS) loans from KB Securities, faced cash liquidity shortages, circular financing was conducted through other Lime funds to prevent losses to the securities firm. TRS is a loan-type fund where the securities firm provides the fund as collateral.
The prosecution argued, "TRS is not problematic when the economy is good, but it becomes an issue when many people invest using collateral. TRS securities sellers completely avoid losses through collateral ratios, and those losses are borne by investors who leverage 2 to 3 times, which is a very risky regulation."
In response, KB Securities stated, "From KB Securities' standpoint, the prosecution artificially combined fragmented facts and interpreted them in a desired direction unfairly."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
