JTBC, JoongAng Ilbo bond investors face at least 30 billion won in losses; legal team formed

A significant number of individual investors, estimated at over 300, have suffered substantial financial losses, exceeding 30 billion won, due to bonds issued by media companies JTBC and JoongAng Ilbo. A joint legal team, comprising the Lee Bok-hyun Law Office and Law Firm Changcheon, announced on May 9th that they have formed a "Joint Lawyers Group for Compensation of Damage to Investors in JoongAng Group Bonds" to represent these affected individuals.

The legal team currently represents 286 investors, with the total value of the bonds they hold exceeding 30 billion won. JTBC has recently filed for corporate rehabilitation proceedings in the Seoul Rehabilitation Court, while JoongAng Ilbo has applied for workout, a corporate debt restructuring process, with its creditors. The investors, described as ordinary citizens, had invested their savings, intended for medical expenses, living costs, or retirement planning, seeking slightly higher interest rates than offered by banks.

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The victims were mostly individuals who were trying to secure funds for medical expenses and living costs, or plan for their retirement, with slightly better interest rates than banks. Their money was used for the cash flow of a giant media company, leaving them with enormous financial losses.

Lawyers for the investors highlighted a severe information asymmetry, stating that the financially distressed companies, with debt-to-equity ratios exceeding 2600% and in a state of capital impairment, continued to sell bonds to individuals just days before filing for rehabilitation. Investors relied on the expertise of financial institutions like banks and securities firms, which managed the issuance, sale, and circulation of these bonds, entrusting them with their hard-earned money.

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Even though the company was in a state of capital impairment with a debt-to-equity ratio exceeding 2600%, it sold bonds to individuals just five days before applying for corporate rehabilitation. Individual investors invested their hard-earned money, trusting experts such as financial institutions (banks, securities firms) that were responsible for issuance, sale, and circulation, under conditions of information asymmetry where they could not know the company's exact financial status.

The legal team is calling for a rigorous investigation by the Financial Supervisory Service into securities firms that underwrote and sold the bonds, earning substantial profits. They specifically pointed to Shinhan Investment Corp., which underwrote a significant portion of the bonds, and Kiwoom Securities, which sold electronic short-term bonds. The team also urged scrutiny of investment advisory firms and other securities companies involved in the sale and brokerage of these bonds.

Furthermore, the lawyers argued that the bond issuance, though formally allocated to institutions, was effectively structured for sale to individuals. They asserted that the lead underwriters could not have been unaware that the majority of these bonds would ultimately be purchased by individual investors. Lee Bok-hyun, the lawyer leading the group, previously served as the head of the Financial Supervisory Service during the Yoon Suk-yeol administration.

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We urge the Financial Supervisory Service to conduct a strict investigation into securities firms, etc., which earned profits of hundreds of millions of won each time they underwrote and sold bonds.