Category: Securities

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Recently there are so many lawsuits being filed against domestic and foreign banks in Korea with regard to the bank’s irresponsible fund sale.  The Korean fund buyers are alleging the losses in the funds which are still on-going were caused by the fund-sellers’ not informing sufficient information on the risk and possibilities of losses when they put the money to the funds.

As a matter of law, Korean court has ruled that the banks have legal duties to inform the customer sufficiently of the structure of the investment such as fund or option transaction and the risk of possible losses when they solicit the customers for investments.  If they neglect that obligation, it constitutes a breach of contract and (more…)

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Today just a few hours ago, the Seoul High Court sentenced partly not guilty to the head of U.S. private equity fund Lone Star’s South Korean operations (Lone Star Advisory Korea).

Last February Seoul Central District Court had sentenced all guilty and had detained Mr. Paul Yoo, the head of Lone Star Advisory Korea, for stock rigging and misappropriation charges. Also, the court had ordered Korea Exchange Bank and LSF-KEB Holdings SCA, a Belgium-based unit that holds Lone Star’s stake in KEB, to pay 25 billion won ($26.50 million) each in fines, saying both secured unfair profits as a result of the stock-rigging.

The defendants all had appealed and the Seoul Court today reversed and amended the lower court’s ruling, saying “as the Lone Star Fund did actually discuss a capital decrease in a meeting of the board of directors, there had been no falsehood in its reporting of possible capital decrease to the public and therefore no stock price manipulating”.

Also, the High court found not guilty in Mr. Paul Yoo’s tax evasion charge and also found not guilty in 2 out of 4 misappropriation charges against Mr. Paul Yoo.  Finally, the court sentenced  2 and a half year of imprisonment to Mr. Paul Yoo, however, suspended the execution for 3 years.  Mr. Paul Yoo Has been released out of prison today by the court’s decree(see the photo). (more…)

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It was reported that a former senior executive at the Korean unit of Lehman Brothers, a U.S. investment banking firm, was arrested for conspiring in one of the biggest stock price manipulations in Korea.  Seoul Central Prosecutors Office said on May 5 it had arrested a 41-year-old former executive director at Lehman Brothers’ Seoul Office. (more…)

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It was reported that Lone Star Fund and HSBC agreed to extend their contractual deadline for completion of HSBC’s proposed acquisition of 51.02 percent of Korea Exchange Bank(KEB) from April 30 to July 31.  HSBC had entered into a contract to buy out KEB from the Lone Star last September with a provision that either side can cancel the contract unless they obtain government approval for the sale by the end of April. Currently the Korean government has not approved the deal due to ongoing lawsuits regarding Lone Star’s alleged (more…)

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On February 1, the Seoul Central District Court found Mr. Paul Yoo, the head of U.S. private equity fund Lone Star’s South Korean operations (Lone Star Advisory Korea) guilty of manipulating the stock price of a credit card unit of KEB. Mr. Paul Yoo was sentenced to five years in jail and ordered to be immediately detained. Also the court ordered KEB and LSF-KEB Holdings SCA, a Belgium-based unit which holds Lone Star’s stake in KEB, to pay 25 billion won ($26.50 million) each in fines, saying both secured unfair profits as a result of the stock-rigging. Lone Star said it would appeal.

It was the first court verdict in a long-running legal battle between South Korean prosecutors and Lone Star’s South Korean operations. This case is important because it could affect British-based bank HSBC’s plan to pay $6.3 billion for a majority stake of KEB, a deal which is pending regulatory approval.

But the regulatory Financial Supervisory Commission said it would delay a decision on Lone Star’s status as a top shareholder in KEB and on approving a sale of the bank until all legal issues over the fund are resolved. Actually Lone Star is fighting back to the Korean prosecutors in 2 legal trials. This case is one part of them, and the other trial involves a former finance ministry official and (more…)