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Photo = FSS |
[Alpha Biz= Paul Lee] Seoul, April 23, 2025 — Korea’s Financial Supervisory Service (FSS) announced that victims of the troubled Discovery Fund scandal will be compensated for up to 80% of their losses, following a ruling by the Financial Dispute Mediation Committee.
Industrial Bank of Korea (IBK), the largest distributor of the fund, has been ordered to pay 80% of investor losses, while Shin Young Securities is to compensate 59%, according to the FSS statement released Tuesday.
The Discovery Fund, managed by Jang Ha-won — the brother of former presidential policy chief Jang Ha-sung — was marketed between 2017 and 2019 as a high-yield, low-risk investment. However, the fund invested heavily in high-risk U.S.-based peer-to-peer (P2P) loans, many of which turned out to be insolvent. The situation culminated in a massive redemption suspension worth approximately KRW 250 billion (USD 180 million) in 2019.
The FSS previously determined a 64% compensation ratio in a 2021 mediation, citing inadequate explanation of risks and poor internal controls. However, further investigations in 2023 revealed additional legal violations by Discovery Asset Management, prompting a second round of mediation.
The FSS had considered ordering full compensation through contract cancellation, pending confirmation of asset insolvency from U.S. authorities. However, the U.S. SEC and court-appointed asset managers were unable to provide sufficient documentation due to data unavailability and legal constraints. Additionally, Jang Ha-won was acquitted of criminal charges in January 2025 by Korea's Supreme Court.
With this latest decision, compensation will be distributed to investors holding 209 accounts at IBK and 35 accounts at Shin Young Securities. The FSS expressed regret over the prolonged process, attributing delays to the complexity of overseas investigations.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
