South Korea’s Woori Bank on Monday has decided to heed to the financial watchdog’s recommendation to compensate to end-investors who dealt with heavy losses due to the lender’s selling of funds tied to 1.7 trillion won ($1.5 billion) misselling scandal involving now-defunct hedge fund Lime Asset Management.

The nation’s fourth-largest commercial lender by total assets will provide 78 percent of total investments made by an 82-year old man -- whose investment had been frozen since 2019 -- and 68 percent to a corporate investor who initially sought out safer product. The two investors were specifically mentioned by the Financial Dispute Conciliation Committee, a separate arbitrator under the umbrella of the Financial Supervisory Service, as subjects of the compensation last month. 

Besides the two, the FSS has asked Woori to compensate other unnamed Lime fund victims who purchased the products via Woori. Woori would have to pay up in a range of 40 percent to 80 percent of the principal investments of individual investors and 30 percent to 80 percent for corporate investors, if the bank follows the request. 

Woori said it plans to expand its compensation to other investors that faced losses in its Lime fund misselling.

The total value of Lime funds missold by Woori amounts to roughly 270.3 billion won.

The bank’s announcement comes earlier-than-expected as the due date for its decision-making was slated for March 29.

Last month, the FSS recommended Woori and the state-run Industrial Bank of Korea to take responsibility as sales channels of the Lime funds and repay certain amounts of investor losses. IBK, which was asked to repay 65 percent of the investment made by a retiree and offered a total of 28.6 billion won worth of Lime funds to its customers, has yet to respond to the FSS.

Woori’s latest announcement is projected to alleviate some pressure stemming from sanctions weighed on the lender by the FSS. The FSS last month slapped Woori Financial Group Chairman and former chief executive of Woori Bank Sohn Tae-seung with the second-heaviest sanction in the watchdog’s five-level punishment scale. The sanction puts Sohn at the risk of being barred from working in the financial industry for at least three years after his current term as chairman ends in March 2023.

The FSS’ conciliation committee has handled over 670 cases tied to the Lime funds following Lime Asset Management’s sudden move to freeze all its assets in 2019. Though it was once consideBy Jung Min-kyungred one of the fastest growing hedge funds in Korea, it has since been found to have run a Ponzi scheme and had been murky about its finances. 

By Jung Min-kyung (mkjung@heraldcorp.com)