Former Fidelis Asset Management Executives Acquitted... Gwangjang Succeeds in Defending Key Financial Sector Risks

All Defendants Acquitted of Fraud and Capital Markets Act Violations

Gwangjang Law Firm announced on the 23rd that it had defended the criminal risks faced by an asset management company that incurred large-scale losses, thereby establishing an important legal precedent for the financial industry.

Gwangjang Law Firm

On the 19th, the 11th Criminal Division of the Seoul Southern District Court (Presiding Judge Jang Chan) acquitted Fidelis Asset Management (now YK Asset Management) and its former and current management of all charges of fraud and violations of the Capital Markets Act.

The case was triggered by the insolvency of a trade finance fund (the Fidelis Fund) worth 180 billion won. Prosecutors indicted the defendants on criminal charges, alleging that the product prospectus contained false or incomplete statements regarding credit ratings, insurance contracts, and payment guarantees. In particular, in the wake of a series of fund loss incidents after the COVID-19 pandemic, amid an atmosphere in which the responsibility of financial companies was being strongly emphasized, the attempt to impose criminal punishment on the management of an asset management company had caused tension throughout the market.

In response, the defendants appointed Gwangjang’s Financial Litigation Team as their counsel and, over the course of about one year, engaged in meticulous evidence collection and strategic legal arguments. Gwangjang argued that “all entries in the product prospectus were based on objective materials available at the time, such as credit rating reports, insurance contracts, and counterparties’ financial statements, and did not fall outside the scope of reasonable judgment,” asserting that there was no intentional deception or material omission.

The court accepted these arguments. In its written judgment, it stated, “It is difficult to conclude that the entries in the product prospectus were false or incomplete, and it is also difficult to find that material matters were intentionally concealed,” and held that “it is reasonable to view the losses arising from the fund’s failure to repay principal at maturity as the realization of the fund’s inherent risks caused by the unforeseeable external circumstance of COVID-19.”

This ruling is being evaluated as a judgment that respects the principle of self-responsibility and the presumption of innocence. In particular, it is seen as consistent with an earlier decision by the Seoul Central District Court in a damages lawsuit related to the same fund, which recognized that “there was no breach of the asset management company’s duty to explain,” thereby establishing a stance that the liability of asset management companies is limited on both civil and criminal fronts.

Gwangjang is being credited with going beyond a simple defense in this case to present a strategic legal response model that protects the lawful work of financial institutions.

A representative of Gwangjang said, “This ruling is a case that has restored the legal balance that is essential for the sound development of the financial market,” adding, “We will continue to provide strong legal protection so that financial institutions are not exposed to unjust criminal risks in the course of carrying out their lawful work.”