Jang Ha-won's 'Discovery Fund'
The Discovery Fund is one of the private equity funds that have incurred massive losses.
A distinctive feature of the Discovery Fund is that it is a fund of funds.
Discovery Asset Management is a form of reinvestment of investment money into other funds that have invested in stocks or bonds.
As a result, the money of domestic investors went to DLI, a US asset management company, but as this money was frozen in the US, the redemption was suspended in Korea as well.
In the end, the Discovery Fund was suspended in 2019, two years after selling products to domestic investors from April 2017.
As a result of the provisional tally by the Financial Supervisory Service, as of 2021, the amount of damage to domestic investors is over 250 billion won.
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There is one more reason why Discovery Funds are getting attention.
The point is that the CEO of Discovery Asset Management is Jang Ha-won, the younger brother of Jang Ha-seong, former head of the Blue House Policy Office.
The Discovery Fund began selling in Korea in April 2017, and then Professor Ha-seong Jang of Korea University will take office as head of the Blue House Policy Office in about a month.
So, it was said that CEO Jang Ha-won was able to recruit investors in a short period of time through Discovery Fund products through Industrial Bank of Korea and others because of his brother's halo.
VIPs investing in the Discovery Fund
The investigation into the Discovery Fund started last year by the Seoul Metropolitan Police Agency's Financial Crimes Investigation Unit.
The police secured a list of so-called VIPs who invested in the Discovery Fund through an omnidirectional investigation, including seizure and search.
The names of Jang Ha-seong and Kim Sang-jo, who served as the Blue House policy directors in the previous administration, appeared on the list, as well as a list of Korea University professors and members of the National Assembly.
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The amount of investment by former head of the policy department, Jang Ha-seong, is estimated to be 6 billion won, considering the property details disclosed in the official gazette and the list of products that have been suspended from redemption.
Kim Sang-jo, former head of the Blue House policy office, is also estimated to have invested around 400 million won.
The time of investment is July 2017.
It doesn't matter if they simply invested in a discovery fund.
However, unlike other ordinary investors, it is a different story if you have received special management.
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As a result of analyzing the confiscated items from Discovery Asset Management, the investigative agency believes that it internally recognized concerns about fund insolvency in September 2017.
Discovery Asset Management is an area that needs to be revealed through an investigation into how the investment flow of former heads of Jang Ha-seong and Kim Sang-jo was before and after this point.
Are you an investment victim?
Jang Ha-seong and Kim Sang-jo, former chiefs of the Blue House Policy Office, are currently considered only one of many victims.
The point is that he signed up for a fund product like other general investors, and is a victim of not getting his investment back due to the sudden suspension of redemption.
The parties also explained that there was no preferential treatment in the process of joining the fund.
The police have also secured a list of so-called VIPs during the investigation, but the VIPs are also considered victims in that they have not recovered their investment.
It is said that VIPs also became victims of fund insolvency and prevention.
Are you a privileged person?
① Fund structure The
Discovery Fund Fraud Damage Countermeasures Committee has been arguing that the preferential treatment of Jang Ha-seong and Kim Sang-jo, former chiefs of the Blue House, should also be investigated.
There's a reason they see things differently than the average investor.
First of all, their funds appear open-ended if you look at the data on the Discovery redemption suspension.
Funds for general investors are closed-end with no recovery of investment in the middle.
However, unlike the open type, deposits and withdrawals are free.
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In particular, the fund product in which Jang Ha-seong, former manager, invested 6 billion won is estimated to be the 'Discovery Global Opportunity No. 1'.
Sellers are Yuanta Securities and Daishin Securities.
Unlike the money of several individual investors in one product, the fund is a one-person fund in which only one individual subscribes.
Lee Eui-hwan, head of the Discovery Fund Fraud Damage Countermeasures Committee, said, "Like other ordinary investors, they are tied up as victims in that they have not been able to recover their money after stopping redemption, but it is judged that they can recover their investment much more freely."
This is possible because it is an open-end fund and a one-person fund.
It is pointed out that in a situation where the recovery money for VIPs has already been prepared, you may be paying attention.
Moreover, Discovery Asset Management does not specifically disclose details of principal recovery.
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It should also be noted that it is a Discovery Global Opportunity Fund.
The funds sold by Discovery Asset Management have different names for each product and a slightly different investment structure.
Unlike other funds, the reason for discontinuing the redemption of Discovery Global Opportunity is relatively unclear.
For this reason, Eui-hwan Lee, head of the Situation Office, insists, “It is necessary to determine whether or not a person is a victim of redemption suspension after confirming detailed facts such as the reason for suspension of redemption for each fund product and details of the fund’s investment purpose and recovery.”
② Blocking the Fund
The time when Ha-seong Jang and Sang-jo Kim, former policy directors at the Blue House invested money in the Discovery Fund was in the early stages of product sales.
Discovery Fund products started selling in April 2017, and they invested a large amount in July 2017, three months later.
The fund subsequently collected investors through several vendors until February 2019.
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As mentioned earlier, the prosecution believes that it recognized the risk of insolvency internally around September 2017 through the confiscated materials.
Then, in a situation where the money of the former heads of Jang Ha-seong and Kim Sang-jo has already been invested, we need to find out more about whether there was a movement to prevent damage to them due to poor funds.
Court battle over fraud
In the Seoul Southern District Court, a fierce legal battle is taking place over fraud charges against Discovery Fund CEO Jang Ha-won.
Previously, the Seoul Metropolitan Police Agency's Financial Crimes Investigation Unit arrested Jang on charges of violating the Capital Markets Act and fraud under the Act on the Aggravated Punishment of the Specific Economy and sent him to the prosecution.
The Seoul Southern District Prosecutor's Office also arrested and indicted Jang on the same charge.
Prosecutors believe that Jang is suspected of inflicting damages of 134.8 billion won to 370 domestic investors even though he knew that most of the loans were insolvent and could result in losses.
After the defendant's newspaper on the 14th, the first trial is scheduled for December 30th.
Prosecutors sought 12 years for Jang.
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Representative Jang denies the allegation of fraud.
Representative Jang's side is arguing to the effect that he was deceived by Brandon Ross, CEO of DLI, an American asset management company, and that he did not conspire to sell insolvent funds.
Representative Jang's lawyer also made a final argument, saying, "In conclusion, the suspension of fund redemption was a coincidence that the defendants could not have expected at all."
Discovery Fund, remaining tasks ①
If VIPs haven't gotten their money back so far, they may be victims as a result.
However, looking at the timing of their investment and the details of their investment products, we cannot erase the suspicion that they have received special management.
It may have been a separate recruitment to give preferential treatment only to VIPs, but due to unexpected variables, the plan was disrupted and ended in 'attempting to receive preferential treatment'.
If there is a circumstance where ordinary investors' investments are passed over to recover their principal, this will be a bigger problem.
The prosecution needs to investigate further apart from CEO Jang Ha-won's alleged violation of the Capital Markets Act and fraud.
Discovery Fund, remaining tasks ②
The investigation into the Discovery Fund seller also remains.
At the time, it was Industrial Bank of Korea that sold the most discovery funds.
In particular, it is suspected of selling private equity funds at the time.
Private equity funds regulate investors to 49 or less, but in order to avoid this, investors who gathered more than 50 people were divided to avoid public offering regulations.
The Discovery Fund Fraud Damage Countermeasure Committee believed that former IBK President Kim Do-jin was involved in this process and reported it to the police for violating the Capital Markets Act.
The investigative agency needs to look further into whether there was some kind of transaction between Discovery Asset Management and a seller such as IBK.