Yeouido Financial Sector's Grim Reaper 'Hapsudan' Is Coming [Song Seungseop's Financial Light]

First Launch of Joint Investigation Unit at Seoul Central District Prosecutors' Office in 2013
Handled Financial and Securities Crimes at Southern District Prosecutors' Office Since Then
Detected Over 1,000 Financial Offenders Before Abolition
Abolished in 2020, Revived After 2 Years and 4 Months

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Minister of Justice Han Dong-hoon is delivering his inaugural speech at the inauguration ceremony held at the Government Gwacheon Complex on the 17th. [Image source=Yonhap News]

[Asia Economy Reporter Song Seung-seop] There is an entity feared in the Yeouido financial sector. It is the so-called Joint Securities Crime Investigation Unit, known as Hapsudan. In the past, Hapsudan earned the nickname 'Yeouido Grim Reaper' by uncovering over 1,000 financial criminals. Recently, this unit has attracted attention again as it was revived. Since when and why did Hapsudan come to be called the Grim Reaper?

Seoul Southern District Prosecutors' Office in Yangcheon-gu, Seoul.
Photo by Yonhap News

Earned the Nickname 'Yeouido Grim Reaper' by Catching a Thousand Financial Criminals

The history of Hapsudan dates back to 2013 during the Park Geun-hye administration. The government announced a 'Comprehensive Plan to Eradicate Unfair Trading such as Stock Price Manipulation,' citing problems in the domestic capital market. The core was to establish the 'Joint Securities Crime Investigation Unit' at the Seoul Central District Prosecutors' Office. Accordingly, Hapsudan was launched, composed of prosecutors and staff from the prosecution, Financial Services Commission, National Tax Service, Financial Supervisory Service, Korea Exchange, and Korea Deposit Insurance Corporation. The head of Hapsudan was Moon Chan-seok, then the chief prosecutor of the Seoul Central District Prosecutors' Office.

At that time, Hapsudan was granted key authority called the 'Fast Track.' In cases of serious crimes requiring search and seizure, they could bypass the Financial Supervisory Service's investigation and immediately start investigations. Even ongoing securities crime investigations could be transferred to Hapsudan for swift handling if deemed serious. However, Hapsudan's term was about one year, with the Ministry of Justice deciding on extensions as needed.

Moon Chan-seok, then head of the Joint Securities Crime Investigation Unit (chief prosecutor), conducting a briefing on the 100th day since the launch of the Joint Securities Crime Investigation Unit on the afternoon of August 20, 2013, at the Seoul Central District Prosecutors' Office in Seocho-dong, Seoul. [Image source=Yonhap News]

Starting work on May 2, Hapsudan indicted 126 suspects and booked 162 on financial and securities crime charges over seven months. Among them were 38 market manipulators, 25 CEOs, 8 major shareholders, and 13 loan sharks. They uncovered 29 stock price manipulation cases. During this period, illegal profits recovered amounted to 24 billion KRW.

After achieving results, Hapsudan moved from the Seoul Central District Prosecutors' Office to the Southern District Prosecutors' Office in February 2014. This was effectively the 'second term' of Hapsudan. The second term indicted securities firm employees who manipulated prices or brokered such manipulation through client requests, as well as institutional investor employees who bought manipulated stocks for bribes. Investment advisory firm executives and corporations that concentrated investments on specific stocks to drive up prices were also prosecuted.

Hapsudan officially began full operations in February 2015 when the Seoul Southern District Prosecutors' Office was designated as a specialized financial crime prosecution office. The Financial Investigation Divisions 1 and 2 from the Seoul Central District Prosecutors' Office were transferred to the Southern District Prosecutors' Office. A deputy chief prosecutor position was established to oversee and direct financial and securities crime investigations. The Southern District Prosecutors' Office also took charge of capital market disruption acts such as embezzlement and breach of trust by private financial companies and executives of listed companies.

Prosecutors leaving after conducting a search and seizure at the ShillaJen headquarters inside the Busan Knowledge Industry Center in Buk-gu, Busan, in August 2019.
[Image source=Yonhap News]

Since then, the Southern District Prosecutors' Office, which has jurisdiction over Yeouido, and its subordinate Hapsudan have effectively become the control tower for financial securities crime investigations. They have investigated many major and well-known cases, including the 'eat-and-run controversy' involving former Hanjin Shipping chairman Choi Eun-young, the Hanmi Pharmaceutical stock price manipulation suspicion case, the fraud case of Lee Hee-jin, known as the stock millionaire of Cheongdam-dong, and the Shiniljen case.

Hapsudan Abolished by Choo Mi-ae, Revived by Han Dong-hoon after 2 Years and 4 Months

Hapsudan, which had been thriving, faced an existential crisis in 2019. After former Minister of Justice Cho Kuk took office, the Ministry of Justice and Prosecutor Reform Committee recommended reducing all direct investigation departments. The large-scale Hapsudan was also considered for dissolution.

Eventually, in 2020, Hapsudan was abolished. It was included among 13 direct investigation departments to be eliminated as part of prosecutorial reform. At that time, Minister of Justice Choo Mi-ae testified before the National Assembly's Legislation and Judiciary Committee, stating, "Although Hapsudan was known as the Po Cheong-cheon (a legendary incorruptible official) for securities crimes, it was a hotbed of corruption." She pointed out, "There were ongoing controversies over collusion among prosecutors, investigators, and former lawyers due to direct investigations of high-value financial cases." In 2016, Kim Hyung-jun, then head of Hapsudan, was arrested for receiving money from related parties, and Kim Bong-hyun, a key figure in the Lime scandal, was accused of providing entertainment and bribes to prosecutors and investigators, which were among the reasons.

Kim Oh-soo, then Prosecutor General (fifth from the left), and others are unveiling the plaque at the inauguration ceremony of the Financial and Securities Crime Investigation Cooperation Unit held on September 1 last year at the Seoul Southern District Prosecutors' Office in Mapo-gu, Seoul. Photo by Kim Hyun-min kimhyun81@

Subsequently, criticism grew that financial securities crimes were not being properly investigated. In response, former Minister of Justice Park Beom-gye formed the 'Financial Securities Crime Investigation Cooperation Group' in 2021. However, this group focused on collaboration among prosecution and financial authorities, and with the disappearance of direct investigation functions, its capabilities declined and it was widely regarded as ineffective.

Hapsudan was revived on May 18 this year when Minister of Justice Han Dong-hoon took office, 2 years and 4 months after its abolition. This decision was made just one day after Minister Han stated in his inaugural speech, "I will immediately revive the Joint Securities Crime Investigation Unit." It was established as a non-statutory organization within the Seoul Southern District Prosecutors' Office, requiring no presidential decree amendment.

The first investigation of the revived Hapsudan is the 'Luna-Terra' crash case. Terraform Labs CEO Kwon Do-hyung was sued by investors, and the Seoul Southern District Prosecutors' Office assigned this case to Hapsudan.