'KRW 15.1 Billion Loss' for Hyundai Motor Chung Mong-Koo Foundation... Hyundai Motor Securities Also Ordered to Pay KRW 9 Billion on Appeal

A court has upheld an earlier ruling on appeal that Hyundai Motor Securities must pay approximately KRW 9 billion in damages to the Hyundai Motor Chung Mong-Koo Foundation, which lost approximately KRW 15.1 billion after investing in a resort development project in Las Vegas, U.S.

According to legal sources on October 20, the Seoul High Court's Civil Division 14-1 (Presiding Judge Nam Yang-woo and Judges Hong Seong-uk and Park Jae-woo) on October 15 dismissed appeals filed by both parties in the foundation's damages lawsuit against Hyundai Motor Securities, leaving the lower court's ruling in place.

Hyundai Motor Securities had recommended that the foundation invest in a fund related to a mixed-use resort development project in Las Vegas, U.S., in 2018, while managing its funds under a discretionary investment management agreement.

The foundation accepted the recommendation and invested approximately KRW 15.877 billion. However, construction was suspended as the COVID-19 pandemic spread, resulting in a loss of KRW 15.109 billion of the investment.

The foundation filed a lawsuit in 2021, claiming that Hyundai Motor Securities had breached its duty of care by failing to adequately inform it of the risk of losses during the investment process.

Hyundai Motor Securities countered that the foundation was aware of the investment risks because it had experience investing in alternative real estate investment products, and that the company had explained all the risk factors that could have been identified at the time.

The trial court found that Hyundai Motor Securities had no intent to deceive the foundation. However, it held the company liable for failing to adequately explain the investment risks and the likelihood of recovering the invested funds. It ordered the company to pay KRW 9.0654 billion, equivalent to 60% of the loss.

The appellate court reached the same conclusion. It pointed out that Hyundai Motor Securities' investment proposal stated that there would be no problem recovering the principal by disposing of the collateral even in the worst-case scenario.

The court found that the company should have adequately explained that the likelihood of recovering the investment could decline if the development project failed. In particular, it found insufficient evidence that Hyundai Motor Securities had explained these risks in a way that the foundation, as a general investor, could understand, and dismissed the appeal.

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