Korea LIME
LIME Asset Management Co. is a South Korean investment consulting company that was established on March 30, 2012. The company was founded by Jongjoon Won, who was previously a fund manager at Truston Asset Management and Brain Asset Management. In 2015 the company shifted to being operated as a hedge fund management firm. The company quickly developed by a private fund that focused on investment in mezzanine financial products. It was revealed that Vice-President Jongpil Lee of the company embezzled funds from companies where customer assets had been invested.
Issues
In July 2019, LIME began selling convertible bonds of companies listed on the KOSDAQ, and around this time, suspicion arose that the company was maintaining an illegal rate of return. The share prices of stocks that were in the fund run by LIME crashed, and there were concerns of an imminent fund run crises. This led to redemptions being frozen.
The issue was caused by purchasing a large volume of insolvent assets, including mezzanine of KOSDAQ zombie companies, for increasing the rate of return in the short-term. In Korea there are regulations which limit how many bonds that can be owned by one entity. However, to bypass this regulation, "parking transactions" were done, by making purchases in the name of another company. It is also alleged that when the fund experienced a loss, returns were fabricated by replacing the loss with monies from another fund.
Timeline of the Case
On February 19, 2020, the Prosecutor's Office conducted a search and seizure in connection with Shinhan Asset Management and LIME Asset Management.
On March 31, 2020, associates of Chairman Kim of Star Mobility were arrested.[1]
On April 23, 2020, at around 9:00 PM, Jongpil Lee, former Vice President of LIME, and Bonghyeon Kim, former Chairman of Star Mobility was arrested outside of a residence in the Seongbuk-gu area of Seoul.
Former chairman Kim was hiding out together with former LIME Vice-President Jongpil Lee, and was keeping 530 million won in cash (about USD $428,000), and was storing 5.5 billion won (about USD $4.4 million) in a rental locker located in Seoul. Former chairman Kim testified to the police, "[I] was transporting three luggage carriers containing 5.5 billion won, and since they were so heavy, I hurt my back."[2]
At the end of April 2020, the Financial Supervisory Service carried out a due diligence investigation of Woori Bank and Hana Bank, which sold LIME Asset Management. An additional due diligence investigation of two or three securities companies was also scheduled.