Successfully defended clients and obtained a non-guilty verdict in a USD 227 million fund fraud case

Lee & Ko represented the defendants in a USD 227 million fund fraud case, which attracted much attention nationwide. Lee & Ko obtained a non-guilty verdict in the first and appellate court and is currently representing Discovery Asset Management Co., Ltd.(“DAM”), its executives and employees in the supreme court.

The prosecution indicted Discovery Asset Management Co., Ltd.(“DAM”), its executives and employees on the grounds that i) DAM managed the global fund of funds, which made an investment in U.S. P2P loans with high credit risk, but deceived investors by guaranteeing high returns; and ii) as Direct Lending Investments, which managed U.S. P2P loan products, went bankrupt, DAM failed to respond to all of the resell requirements, which came to a total of USD 227 million, leading to significant damages for the investors. 

On behalf of DAM, its executives and employees, Lee & Ko set up a T/F Team consisting of the attorneys from the litigation group, the criminal practice group, and the capital market compliance group, and argued that DAM was not able to acknowledge high credit risk of U.S. P2P loans by i) pointing out that under the Financial Investment Services and Capital Markets Act, a breach of the duty of care is legally distinct from intention in the context of a criminal offence; and ii) thoroughly analysing the management of U.S. P2P products, and the accounting principles in the U.S., among others. In December 2022, the court agreed with the arguments put forward by Lee & Ko and found DAM, all of its executives and employees not guilty. Likewise, in February 2024, the appellate court ruled that the lower court’s decision was justified.

How to distinguish the duty of care and intention in a criminal offence was the main issue in this case, and this court decision is expected to serve as an important precedent for similar cases in the future. Meanwhile, this case attracted a great deal of media attention, not merely due to the amount of damages, but because the representative director of DAM was a relative of a high ranking government official.