The real Optimus scandal

The financial authority responsible for lax oversight in the unprecedented financial scam that caused 500 billion won ($440 million) of losses for 1,000 investors received a slap on the wrist.

The Board of Audit and Inspection (BAI) found the Financial Supervisory Service (FSS) at fault for the Optimus Asset Management crisis and demanded disciplinary action for four FSS employees and one at the Korea Securities Depositary.

Senior-level officials responsible for supervisory command avoided reprimand. Even taking into account the limited power of the BAI, the government watchdog is under fire. It has not even handed over reference documents of its investigation results to law enforcement. The FSS union criticized the finding as “the typical tail-cutting.” It argues former FSS governor Yoon Suk-heun and deputy Won Seung-yeon in charge of the capital markets are most responsible for the debacle.

The finding clearly places the FSS at fault. The FSS discovered Optimus had added a contradicting appendix allowing investment in corporate bonds while reporting a fund mandating more than 95 percent investment in asset-backed securities of public enterprises, and yet did not bother to ask for correction.

It had a chance to stop the Optimus losses in 2017, but failed to do so It found illegal activities including embezzlement by the company chief, but did not immediately embark on a probe or report to the Financial Services Commission or law enforcement. According to BAI, the FSS had missed the chance to stop or minimize the losses four times.

Law enforcement also has been dragging its feet on the case. Civilian bodies have been noting connections between Optimus and senior government officials and politicians as a former deputy prime minister for economy and a chief prosecutor had been acting as advisers to the asset management company. Yet the prosecution has not been carrying out a thorough investigation and denied political connection.

The investigation on a presidential office staff for influencing the FSS probe has been stalemated. Optimus founder Lee Hyuk-jin has not returned home upon fleeing to the United States in 2018. Lee had served as special advisor on financial policy at the election camp for President Moon Jae-in in 2012 and is a college alumni of former chief of staff Im Jong-seok.

What is stopping the prosecution? Since BAI has found poor supervision, the prosecution must complete the work by thoroughly investigating the details.