Hannuri, on behalf of investors of Discovery US Fintech Global Bond Fund, proceeded with legal action for compensation of losses through cancellation of fund purchasing contracts

   Hit. 958
Date. 2020.05.25   


Hannuri, on behalf of investors of Discovery US Fintech Global Bond Fund, proceeded with legal action for compensation of losses through cancellation of fund purchasing contracts


- Against sales companies such as Hana Bank, Industrial Bank of Korea, Korea Investment & Securities and Hana Financial Investment, and asset management company Discovery Asset Management.


On behalf of investors in the Discovery US FinTech Global Bond Fund (hereinafter referred to as the Fund), Hannuri will take legal action, including filing for dispute settlement with the FSS against sales companies such as Hana Bank, Industrial Bank of Korea, Korea Investment & Securities and Hana Financial Investment, and asset management company Discovery Asset Management.

According to sales information, this fund, raised in Korea, consists of a complex re-indirect structure invested in foreign small business loans and real estate security loans through several stages.

i) The investment funds were invested in private bonds issued by DL Global (“DLG”) in the US.

ii) The above DLG assets were invested in DLI Assets Bravo operated by Direct Lending Investments (“DLI”) in the US.

iii) Fund in DLI Assets Bravo's is estimated to have been used to purchase loan bonds from foreign loan platforms or to purchase corporate bonds of special purpose corporations established by the loan platform.
However, major assets incorporated in this fund is currently undergoing receivership in the US and some assets were confirmed to have lost 80%. Therefore, it seems that significant principal loss is inevitable.
 In addition, as a result of analyzing the product of this fund, there were illegal acts such as ①, ②, ③ below in the sale process.

 

① False or misleading material information


According to sales materials, it seems that some vendors explained that the product’s principal and interest rates are guaranteed by the management company. However, it is highly unlikely that this explanation is true, and it constitutes an invalid act which is prohibited under the Capital Market Law. Therefore, it is highly likely that the sales company that gave the above explanation caused misunderstanding in the investor’s judgment during the sales process by providing false or misleading material information.


② Regarding investment targets, although the following 1st and 2nd events occurred in the United States around February 2019, the sellers concealed such information kept on selling funds to customers.


According to media reports, the following events occurred in the United States in early 2019 regarding the fund's investment target.

• First event: On February 11, 2019, DLI CEO Brendan Ross announced suspension of withdrawals to investors of DLIF funds because of overdue loans from VOIP Guardian Partners I, LLC (“VOIP”) among DLI's investment assets. VOIP-related defaults amounted to 25% of DLI's total investment assets.
•Second event:  As the SEC investigation into DLI and Brandon Ross progressed, Brandon Ross resigned as DLI's director and CEO on March 18, 2019. On March 19, 2019, DLI informed investors there were misinformation on the investment in QuarterSpot and VOIP payback status among the contents of the 2014-2017 business report, and stated that Brandon Ross would resign as director and CEO after SEC’s commencement of investigation. On March 22, 2019, the SEC filed a lawsuit against DLI. 

The reputation and reliability of DLI, the fund's overseas operator, has already been seriously undermined by the above events which both had a significant impact on the fund's investment targets and collateral. Nevertheless, it is confirmed that some sellers continued to sell the fund even after mid-February 2019, hiding the above events from investors.


③ Violation of the principle of suitability, the obligation to explain or the obligation to protect investors


According to sales materials, this fund product was described solid as if it was a stable financial product. Moreover, some vendors seem to have described this product as “4% fixed rate product” or “deposit product” during the sales process. In fact, most of the investors of these products are known to have a stable propensity to invest in products with high safety even if the yield is low. Thus, violations of investors protection obligations, such as the principle of appropriateness and the prohibition of unfair explanations is highly possible in the course of these sales.

 

In general, legal actions that investors can take against illegal activities related to fund investment include (1) filing a compensation claim against sales companies and asset management companies, and (2) canceling the fund contract with the sales company and claiming unfair profits worth the investment.

All of the above ①, ②, ③ illegal acts are considered to be the reasons for claiming compensation for damages from investments against the above sales companies and asset management companies. Of these, ① and ② illegal acts seem to be the grounds for claiming for cancellation of the fund subscription contract.

In response, Hannuri, on behalf of investors in the fund products, will take necessary legal steps to recover all of the investment losses from sales companies (Hana Bank, Industrial Bank of Korea, Korea Investment & Securities Co., Hana Financial Investment Co.) and asset management firm Discovery Asset Management Co., citing serious violations in the selling process.

Specific measures are the return of unfair gains and damages by cancellation of the contract through the FSS's dispute settlement and civil litigation filing. Under strategic judgment, Hannuri plans to conduct efforts to identify the facts, and to collect evidence for criminal prosecution as well. 

Victims who have suffered or are expected to suffer losses after joining the Discovery US Fintech Global Bond Fund issued by Discovery Asset Management can apply for participation after confirming whether you are eligible by reaching Hannuri’s Office (☎ 02-537-9500) or the online litigation delegation site (https://www.onlinesosong.com/) operated by Hannuri. Hannuri will gather victims from May 25 (Mon) to June 19 (Fri), and will file for a dispute settlement with the FSS sequentially from the end of June.