Prosecution seeks arrest warrant for Discovery Asset Management head in fund fraud scandal

Prosecutors on Tuesday sought an arrest warrant for the head of an asset management firm on charges of illegally managing funds as they reinvestigate a massive fund scandal that rattled the nation a few years back.

The Seoul Southern District Prosecutors Office accused Jang Ha-won, head of Discovery Asset Management Co., of violating the Capital Market Act, fraudulent transactions, breach of trust and other charges.

Prosecutors also sought arrest warrants for two former senior officials of the company, both surnamed Kim, on the same charges.

The three are accused of making unfair gains in the process of investing or using funds raised by Discovery from January 2016 to January 2019 in undisclosed places, without prior notice to investors.

They also face allegations of improperly diverting funds from other funds to cover redemption payments when a specific fund runs short while not properly informing investors.

In December, Jang was acquitted of charges of suspending redemptions after selling a fraudulent fund worth 100 billion won (US$74.9 million). His case is currently undergoing trial at an appeals court as the prosecution challenged the lower court's decision. Jang is a younger brother of Jang Ha-sung, a close aide of former President Moon Jae-in.

The case recently came under prosecution investigation once again after the Financial Supervisory Service (FSS) reopened its investigation into Discovery and two other asset management firms -- Lime and Optimus -- that had been at the center of a massive fund fraud scandal a few years ago.

The FSS said it has confirmed additional alleged law violations by the companies, including suspicions that Discovery falsely raised investment for new funds for the redemption of failed funds in 2019 and four of its executives used undisclosed information to make unfair profits.

Lime and Optimus went bankrupt last year after causing trillions of won worth of financial damage to their investors.

Source: Yonhap News Agency

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