Investigations overdueFinancial authorities finally delivered a disciplinary action on Discovery Asset Management that caused 250 billion won ($209 million) in losses three years ago after withdrawals from its funds were suspended. In a plenary session Wednesday, the Financial Services Commission (FSC) suspended the fund operation and CEO Jang Ha-won for three months. The action took place a year after the Financial Supervisory Service (FSS) recommended a punitive action on Jang and his fund in February last year.
Police have expanded an investigation on the CEO’s brother Jang Ha-sung, current ambassador to China, upon discovering that he had invested 6 billion won in the fund in July 2017 when he was policy chief to President Moon Jae-in. Kim Sang-jo, who also served as Moon’s policy chief, put 400 million won in the fund when he was the Fair Trade Commission (FTC) chairman.
Discovery Asset Management suspended withdrawals from April 2019 upon incurring losses from its overseas assets. The fund debacle along with Lime Asset Management and Optimus Asset Management made the triple fund disaster under the Moon administration. The wrongdoings in the Discovery Asset Management still remain unclear though three years have passed. In contrast, actions had been taken with Lime and Optimus.
Various questions are raised regarding Discovery Fund. The private equity fund which was registered just before the last presidential election in 2017 drew state lender Industrial Bank of Korea (IBK) as its primary seller for its fund. Favoritism and influence could have been made during the process. The Discovery Fund quickly enlarged while Jang was the policy chief at the Blue House. According to testimonies from victims, bankers at IBK had highlighted that the fund was being managed by the brother of the presidential policy chief. If Jang had condoned the indirect influence, the matter could be grave. A committee representing victims also argue that Jang had visited the fund office before he was named the ambassador to China.
Even if the two presidential policy chiefs had not broken any law by investing in a fund, their act was inappropriate. A public official also can invest in a private fund. But they should have watched themselves if their office could make any influence. The two officials had been in charge of economic and antitrust policies.
The product they had placed money on was an open fund that could be withdrawn before maturity. But most other investors had their money parked on closed terms that could not be withdrawn before maturity. Police must find out whether there had been any favoritism with the fund and if Jang and Kim had taken out money from the fund before withdrawals were forbidden. The two must explain the affairs to the public.