The Supreme Court of Korea has upheld a ruling that the Financial Services Commission (FSC) must revoke disciplinary sanctions imposed on Jung Young-chae, former CEO of NH Investment & Securities (005940.KS) and current adviser at Meritz Securities, over the Optimus fund scandal.
According to legal circles on Thursday, the Supreme Court's Second Division (presiding Justice Kwon Young-jun) finalized the lower court's ruling in favor of Jung by dismissing the appeal without full review. The original lawsuit sought to overturn the FSC's disciplinary warning. The confirmation comes approximately seven years after the Optimus scandal first erupted in 2019. A dismissal without full review is a system in which the Supreme Court rejects an appeal without a full hearing, determining that the appellate court's ruling contains no legal errors, applicable to all civil cases.
The Optimus scandal involved a scheme that solicited investors by claiming to invest in trade receivables guaranteed by public institutions and local governments, but instead funneled money into distressed corporate private bonds, causing losses of approximately 400 billion won ($290 million). NH Investment & Securities was the largest distributor of Optimus funds whose redemptions were suspended. In November 2023, the FSC confirmed the Financial Supervisory Service's (FSS) proposed sanctions against Jung, issuing a "disciplinary warning" that restricted his reappointment and employment in the financial sector for three to five years, citing violations of internal control obligations related to Optimus fund sales. Jung filed a lawsuit to overturn the sanctions and applied for a stay of execution. The court granted the stay of execution in January last year.
Following the Supreme Court's finalized ruling, Jung told The Seoul Economic Daily in a phone interview, "I feel most sorry for the customers." He said, "The customers couldn't recover their investments because both the financial companies and financial authorities all made foolish mistakes. I have nothing to say to the customers who trusted us with their money, and they have every right to feel wronged." He added, "It took five years to get the ruling to overturn the sanctions," and said, "The people who helped cover up [the Optimus fraud] are fine, while they wrapped up the case by telling us [financial firms] who failed to detect it, 'You should have known just by looking.' That felt unjust."
Meanwhile, Park Jung-rim, former CEO of KB Securities, also won in both the first and second trials in a lawsuit seeking to overturn a job suspension imposed by financial authorities over the Lime fund scandal. The Lime scandal erupted in 2019 when suspicions arose that Lime Asset Management had engaged in irregular trading of KOSDAQ-listed companies' convertible bonds (CBs) and other instruments to fraudulently manage returns, triggering a plunge in stocks held in Lime funds and a subsequent redemption freeze. That case is currently pending before the Supreme Court.
