JoongAng Group Bond Investors' Legal Team: "KRW 32.5 Billion in Damages... Criminal Proceedings If Necessary"

"Investigation Must Be Expanded to Include Discretionary Investment Firms and Credit Rating Agencies"

The joint legal team representing investors in JoongAng Group bonds has pointed out procedural issues in the bond issuance process and insisted that the scope of the investigation must be expanded. They also announced their intention to pursue criminal proceedings if necessary.

On July 13, at a briefing held at the Gwanghwamun Bar Association Hall, the joint legal team for victims of JTBC and JoongAng Ilbo corporate bonds and electronic short-term bonds stated, "The investigation should not be limited to Shinhan Investment Corp. and Kiwoom Securities, but must also be expanded to include Hanyang Securities, on-exchange brokerages, discretionary investment firms, and credit rating agencies."

Lawyer Bokhyun Lee (former Financial Supervisory Service Governor) is speaking at the joint legal counsel press briefing for corporate bond and electronic short-term bond victims held by JTBC and JoongAng Ilbo on the 13th. Photo by Youngwon Kim

Previously, on July 10, the joint legal team submitted an 'opinion statement on the investigation of financial companies related to the issuance of JTBC corporate bonds and short-term bonds' to the Financial Investment Inspection Bureau 2 and the Financial Consumer Protection Bureau of the Financial Supervisory Service. The statement included the current status of damages—250 applicants with a total loss of approximately 32.52 billion won—facts confirmed by the legal team, and necessary points for investigation.

Among the applicants, there are 211 on-exchange corporate bond investors, 29 investors who incorporated bonds through discretionary investment firms, and 10 buyers of short-term bonds. The largest portion of the loss came from on-exchange corporate bond investors at about 23.52 billion won, followed by 5.55 billion won through discretionary investments, and 3.45 billion won from short-term bonds.

The legal team added, "According to the victims' own tally, there are about 450 individual accounts that participated in JoongAng Group corporate bonds, with a participation amount reaching approximately 76 billion won," noting, "The total scale of the damages is likely to be even greater."

The legal team further stated, "Shinhan Investment Corp., Kiwoom Securities, and discretionary investment firms did not adequately review JTBC's objective financial status during the issuance, distribution, and sales process of JoongAng Group corporate and short-term bonds. They also failed to conduct a thorough review of the associated risks and did not sufficiently inform investors of the potential dangers."

The team pointed out that even before JTBC issued corporate bonds in February, the company was already in a state of complete capital impairment. Nevertheless, Shinhan Investment Corp., as the lead manager, concluded that "the redemption of principal and interest would be smooth" and proceeded with the issuance. They also criticized the fact that an on-site due diligence was replaced with a teleconference.

Regarding Kiwoom Securities, the team claimed that the company circumvented investor protection procedures when selling short-term bonds. The legal team said, "Contrary to Kiwoom Securities' explanation that they do not induce the circumvention of financial consumer protection measures such as refusal of happy calls, we have secured call recordings in which a consultant directly instructed and encouraged the registration of happy call refusals." They added, "The outstanding debt of 20.6 billion won related to short-term bonds became a direct cause of JTBC's default."

One investor at the briefing said, "My son entrusted his entire savings, which he had accumulated through part-time jobs from the age of 19 to 28, believing in me to invest it, and now it has become 'zero won.' In February, I was told that the bonds were listed right away, so the company couldn't possibly go bankrupt after receiving the bond funds, and I was reassured by the IR materials distributed by Shinhan Investment Corp. and the lead manager's confidence that repayment would be smooth."

Another investor said, "While tallying individual damages, I found that most of the victims are from the older generation, and many invested all of their retirement funds or pensions. JoongAng Group must now go beyond a simple apology, establish self-rescue plans for individual bond investors, and promise principal compensation through practical funding measures such as internal contributions and the sale of SLL JoongAng."

Bokhyun Lee, former Governor of the Financial Supervisory Service and head of the legal team (Lee Bokhyun Law Office), remarked, "Even the general public could have noticed the problems by looking at the public disclosures. We will hold the advisory firms accountable for not detecting or not disclosing these issues and allowing the (bonds) to be issued indiscriminately. If necessary, we will request the Financial Supervisory Service to investigate JoongAng Group or its subsidiaries for any problems in their fund management, and if necessary, we will have no choice but to proceed with criminal procedures."

This content was produced with the assistance of AI translation services.