Discovery Asset Management (Discovery) lost in the second trial of the lawsuit seeking to cancel the sanctions for violating disclosure obligations.
The Administrative Division 11-3 of the Seoul High Court (Director General Kim Woo-su, Choi Soo-hwan, Yoon Jong-goo) rejected the appeal of the plaintiff in the appeal hearing of the lawsuit filed by Discovery and former CEO Jang Ha-won against the Securities and Futures Commission under the Financial Services Commission, seeking to cancel the ‘securities issuance suspension’ ruling on the 28th.
Discovery received a ‘one-year suspension of securities issuance’ from the Securities and Futures Commission in May 2022. At that time, Discovery and former CEO Jang were suspected of splitting an actual fund into multiple funds while issuing the Discovery Fund. The Securities and Futures Commission judged that this was an attempt to evade the regulation that requires the submission of a securities registration statement when the number of investors in a public fund exceeds 50.
In the first trial, Discovery and former CEO Jang lost. At that time, the court stated, ‘It is reasonable to view that the plaintiff's side has a significant fault, such as willfully violating the obligation to submit a securities registration statement.’
Meanwhile, former CEO Jang was sentenced to 2 years in prison with 3 years of probation and a fine of 1.6 billion won for violations of the Capital Market Act (fraudulent transactions) and the Specific Economic Crimes Weighted Penalty Act (bribery) on the 29th of last month. In this case, former CEO Jang is accused of raising 109 billion won in fund investments through a false investment proposal, despite being aware of the failures that occurred in the management of the Discovery Fund.