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Lone Star and the shadow of Daejang-dong

Published: 20 Nov. 2025, 00:02

Chung Hyo-shik

The author is the social news editor at the JoongAng Ilbo.

The Democratic Party (DP) has long presented itself as a party deeply wary of speculation, even if that stance has faded in recent years. From the military governments to the early years of democratization, the party grew by attacking property speculation among senior officials. After property disclosures for public officials began in September 1993, the party sharpened its image through aggressive investigations during conservative administrations. Its key real estate policy still focuses on curbing speculation, and its nomination rules classify property speculation and corruption as grounds for disqualification. Now in power, the party plans to set up a task force to examine speculation allegations involving the family of the current opposition leader, a move reminiscent of its days as the opposition party.

A view of the Daejang District development site in Pangyo, Seongnam, Gyeonggi, photographed on the afternoon of Oct. 7. The site is the result of the Daejang-dong development project. [YONHAP]

Its approach to short-term international speculative capital has been similar. When the International Centre for Settlement of Investment Disputes (ICSID) on Nov. 18 overturned its 2022 decision that had ordered Korea to pay Lone Star roughly $216.5 in damages and interest, the government held an emergency briefing to welcome the ruling. Prime Minister Kim Min-seok declared that Korea’s “financial supervisory sovereignty” had been affirmed. The ICSID's new decision brings a close to a 22-year dispute between Korea and Lone Star that began with accusations that the U.S. fund bought Korea Exchange Bank (KEB) at a fire-sale price in 2003, followed by allegations of a 4.7 trillion won windfall when Lone Star resold the bank to Hana Financial in 2012 and the ICSID's 2022 ruling.

Kim Man-bae, the majority shareholder of Hwacheon Daeyu Asset Management, arrives at Seoul Central District Court on Sept. 13 for a continued first-instance hearing on charges of concealing profits from the Daejang-dong development project. [NEWS1]

But the DP’s record on Lone Star has been inconsistent. The sale of KEB, the root of the controversy, was itself overseen by a Democratic Party administration. Yet the DP's investigation into the sale targeted only conservative officials who later became high-ranking figures, such as Choo Kyung-ho, then a Finance Ministry official, and Han Duck-soo, then an adviser at Kim & Chang. When the Supreme Court in 2010 ruled that policy decisions around the sale could not constitute criminal breach of trust, the party blamed prosecutorial failings rather than addressing its own role. It also campaigned vigorously against the investor-state dispute settlement clause in the Korea-U. S. FTA, warning that ISD would turn Korea into a “playground for speculative capital.” When Justice Minister Han Dong-hoon filed the suit to overturn the ICSID's decision, the DP argued that Korea would only waste hundreds of billions of won in mounting interest and legal fees. Had the government withdrawn the suit, the outcome could have been far worse.

The party’s aversion to speculation has also collapsed in the face of the Daejang-dong scandal. The government’s second investigation team charged private developers with earning 489.5 billion won in illicit gains, up from an initial 65.1 billion won, prompting the opposition to argue that prosecutors exaggerated the case and that dropping the appeal was justified. Private developers reaped 788.6 billion won from the project, including 405.4 billion won in land development profits, 369 billion won from apartment sales and 14 billion won in asset management fees. However, of that, the first trial court recognized only 42.8 billion won — just 5.4 percent — as criminal profit subject to forfeiture.

If the DP still stood by its traditional values, it would be demanding an appeal to recover the full gains that the lower court refused to recognize. It should be urging the government to challenge the court’s acquittal on conflict-of-interest charges and joining efforts with the opposition to pass a special law aimed at clawing back Daejang-dong profits.

Then-Acting Prosecutor General Noh Man-seok, who that day had expressed his intent to resign after deciding not to appeal the Daejang-dong land development case, leaves the office at the Supreme Prosecutors’ Office in Seocho District in southern Seoul on Nov. 12. Noh officially resigned from his role the following day. [JOINT PRESS CORPS]

The first responsibility for the dropped appeal, however, lies with the prosecutors who abandoned their duty to uphold criminal justice. Regardless of political pressure from the administration, former Acting Prosecutor General Noh Man-seok and former Seoul Central District Prosecutors’ Office chief Jung Jin-woo should have filed the appeal and, if necessary, resigned afterward — the customary practice among senior prosecutors. Even figures within the DP said they had assumed an appeal was certain. The consequences are already visible, as private developers such as Kim Man-bae and Nam Wook are moving to have 207 billion won in frozen assets released.

The prosecutors still on the case must now pursue the second trial diligently. They must seek recognition of the maximum possible breach-of-trust amount and ensure that the city of Seongnam can recover additional losses through civil lawsuits.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.