[Asia Economy Reporter Hwang Seoyul] A former team leader at KB Securities was sentenced to two years in prison in the first trial for selling Lime Asset Management (Lime) funds despite knowing they were defective. Executives and employees who were tried together received suspended or deferred sentences. Former Lime Vice President Lee Jongpil, who was suspected of collusion, was acquitted.
On the 12th, the 14th Criminal Division of the Seoul Southern District Court (Presiding Judge Kim Donghyun) sentenced former KB Securities team leader Kim, who was tried on charges including fraud under the Act on the Aggravated Punishment of Specific Economic Crimes, to two years in prison. However, employees Ryu and Kim, who were indicted for violating the Capital Markets and Financial Investment Business Act, were sentenced to one year in prison with a two-year suspension. Employees Moon and Shin received six months and eight months in prison respectively, but their sentences were deferred. KB Securities as a corporation was fined 500 million won.
They were indicted on charges of selling sub-funds to victims while knowing that Lime’s parent fund invested in unrated private bonds instead of ‘A-rated high-quality bonds’ as stated in the proposal in March 2019.
They were also charged with falsely stating that there were no sales commissions to customers while receiving total return swap (TRS) fees, including sales commissions, indirectly from asset management companies such as Lime.
The court stated that the phrase ‘investment in A-rated high-quality bonds’ was “misinterpreted if understood as investing only in bonds rated A or higher.” However, it found some charges valid regarding the false statement that sales commissions were not received despite actually receiving them.
Regarding Kim, who was additionally indicted for personal crimes using insider information, the court acknowledged guilt for “falsely stating that sales commissions were not received” and explained the sentencing by saying, “Financial institution employees are punished very strictly for receiving money or valuables.” The court also considered that Kim cleverly exploited gaps for personal gain and that the amount of damage was significant. However, considering the prosecution’s planned appeal, Kim was not detained in court.
Former Vice President Lee Jongpil, suspected of collusion with KB Securities employees, was acquitted. The court explained, “All actions related to Lime fund sales were carried out internally within KB Securities.”
Additionally, KB Securities as a corporation, accused of failing to fulfill supervisory duties during the fund sales process, was fined 500 million won and ordered to pay. Five other employees besides former team leader Kim were fined 100 million won each, but all sentences were deferred.
Earlier, at the sentencing hearing held on November 28 last year, the prosecution requested prison terms of 2 to 8 years and fines of 100 million to 300 million won for five KB Securities employees. For former Vice President Lee, the prosecution requested 5 years in prison and a 100 million won fine, and for KB Securities as a corporation, a fine of 750 million won.
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