Discovery Jang Ha-won Warrant Dismissed, Prosecution "Considering Refiling"... Obstacles from the Start of '3 Major Funds Reinvestigation'

The denial of the arrest warrant for Jang Ha-won, CEO (64) of Discovery Asset Management (hereafter Discovery), is causing the prosecution's reinvestigation of the 'three major funds' (Lime, Optimus, Discovery) to falter from the very beginning. Although the prosecution plans to consider reapplying for the arrest warrant, citing difficulty in accepting the reasons for denial, if the reinvestigation remains sluggish?especially since CEO Jang was acquitted in the first trial regarding the suspension of redemptions?the prosecution will inevitably face criticism for 'inadequate investigation,' making their burden even heavier.

[Image source=Yonhap News]

On the 11th, a representative from the Seoul Southern District Prosecutors' Office stated, "We are reviewing the reapplication of the arrest warrant for CEO Jang." The Joint Investigation Team on Financial and Securities Crimes (Chief Prosecutor Dan Seong-han) of the Seoul Southern District Prosecutors' Office filed arrest warrants on the 5th against CEO Jang, former Head of Investment Kim, and former Operations Team Leader Kim, all affiliated with Discovery, on charges including fraudulent unfair trading under the Capital Markets Act, unregistered financial investment business, breach of trust, and bribery under the Act on the Aggravated Punishment of Specific Economic Crimes. However, on the 8th, Judge Kim Ji-sook, in charge of warrants at the Seoul Southern District Court, held a detention hearing and dismissed all the arrest warrants.

Within the prosecution, there is a palpable sentiment of difficulty in accepting the reasons for the denial of CEO Jang's arrest warrant. Judge Kim stated, "There is room for legal dispute regarding some charges, and due to insufficient evidence, it is necessary to guarantee the suspect's opportunity to defend themselves." However, it is known that although the prosecution publicly disclosed only four charges related to CEO Jang and others, in reality, seven to eight charges were applied. Since the court considered only 'some' charges as disputable without specifying which ones, the prosecution now must diligently substantiate each charge.

There is also a reaction of incomprehension regarding the dismissal reason that "considerable evidence appears to have been collected as the related criminal case is ongoing." CEO Jang and others were indicted last July on charges of suspending redemptions (fraud under the Act on the Aggravated Punishment of Specific Economic Crimes) before this reinvestigation but were acquitted in the first trial in December of the same year. The charges involve selling the fund to about 370 domestic investors despite knowing the loan receivables were impaired, causing approximately 134.8 billion won in damages due to suspension of redemptions, but the first trial court judged that the prosecution failed to properly prove the 'intent' of fraud. The case mentioned by the court appears to refer to this matter. The prosecution maintains that the ongoing reinvestigation concerns charges different from those in the previously indicted case. A prosecution official said, "Although the cases are not entirely unrelated, and some facts or evidence may overlap, since this reinvestigation focuses on illegal matters during the operation of the Discovery fund beyond just the suspension of redemptions, it is essentially a different case," they said.

[Image source=Yonhap News]

The Discovery case was the fastest progressing among the three major funds under reinvestigation by the prosecution. The recent application for an arrest warrant for a key figure in the case was the first since the reinvestigation began. However, failing to secure CEO Jang's custody meant the prosecution did not properly set the first step. A legal insider commented, "The reason of insufficient evidence to prove criminal charges could imply issues with guilt or innocence itself, so it is something the prosecution must take very seriously," adding, "Since further investigation is needed for charges lacking sufficient evidence, this can be interpreted as a message that the prosecution must remain vigilant." An anonymous financial and securities law specialist lawyer also said, "Even if the charges are not identical to those in the already indicted case, if related materials overlap significantly, such a dismissal reason could arise," and predicted, "When reapplying for the arrest warrant, the prosecution will need to prove the seriousness of the crime and the certainty of the charges."

Amid political opposition framing the reinvestigation of the three major funds as a political offensive, there is also an expectation that producing definite investigative results will give momentum to the reinvestigation. When recently asked about interpretations arising from the appointment of Kim Yoo-cheol, a 'public security expert,' as the new head of the Seoul Southern District Prosecutors' Office?investigating the three major funds involving opposition figures?he responded, "We will conduct the investigation fairly to avoid any concerns." If the prosecution reissues the arrest warrant for CEO Jang and obtains definite results, it can dispel such concerns. Discovery victims are also demanding a strict investigation from the prosecution. Lee Eui-hwan, Executive Director of the National Private Fund Fraud Victims Joint Countermeasure Committee, said, "Hundreds of people nationwide are struggling to continue their lives after suffering damages, which is tantamount to 'financial murder,'" and added, "I hope the prosecution conducts the investigation thoroughly so that the warrant is not dismissed again upon reapplication, and I expect the court to handle the case strictly."