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2 key suspects in hedge fund scandal detained

Finance 00:00 April 24, 2020

SUWON, South Korea, April 23 (Yonhap) -- Two key suspects implicated in a major hedge fund scandal were detained by police on Thursday.

Gyeonggi Nambu Provincial Police Agency said it apprehended Lee Jong-pil, former vice president of Lime Asset Management Co., and Kim Bong-hyun, owner of Star Mobility, in Seoul.

Lime Asset has been under probe over its alleged cover-up of massive losses and subsequent suspension of fund redemption worth an estimated 1.6 trillion won (US$1.3 billion). Star Mobility is believed to be the main financial resource for Lime.

This file photo from April 2, 2020, shows the head office of Star Mobility, a company implicated in a scandal surrounding hedge fund Lime Asset Management Co. (Yonhap)

Prosecutors filed an arrest warrant for Kim for a separate case in December. He had been on the run since then.

On April 1, Seoul Southern District Prosecutors Office raided Star Mobility's head office in Ansan, 40 kilometers south of Seoul, and a golf course in Yongin, about 50 kilometers south of the capital, on suspicion that Kim may have used Star Mobility's membership in the club for illegal lobbying.

The prosecution suspects Lime's investment, worth tens of billions of won in Star Mobility, was embezzled.

One of Kim's aides at Star Mobility was arrested later that day, on charges of colluding in the embezzlement of about 16.1 billion won from a local bus company from late 2018 to early 2019.

The Financial Supervisory Service (FSS) began probing Lime's suspected irregularities in July last year. The watchdog accused Lime of having concealed investment losses and inflating investment returns in a bid to keep its customer base.

In addition, the hedge fund was allegedly involved in a Ponzi scheme to cover losses, and engaged in misselling, or selling products to customers without providing adequate information or explaining the high risks involved.

The investigation has prompted spooked investors to scramble to withdraw their money. In October, the company froze withdrawals, citing an inability to liquidate enough assets to meet the redemption requests.
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