Chapter 7. Premus Fund (4)

We headed towards a restaurant near the company.

"It's a budae jjigae place."

"They say this place is really good."

It was a place I had been dragged to by Dong-ho senior before. I've been here many times since then.

It was still before lunchtime, so the restaurant was quite empty. Soon, office workers would start to flood in.

"What do you want to talk about?"

"Do you know about the Premus Fund?"

"Of course."

"This time, while writing a recommendation report for that fund, I found something a bit strange."

At my words, she stopped pouring water.

"What's strange about it?"

"Well, ..."

I roughly explained the content I had reported to the manager.

"Is it that the returns are inflated, or that there might be a problem with the assets held?"

"Yes."

"Why do you think that?"

"Recently, a 200 billion won redemption request from institutional investors has been delayed."

"Isn't that because it takes time to sell the bonds they hold?"

Whether it's bonds or stocks, if you try to sell a large amount at once, it's hard to get a fair price.

When there are large redemption requests, it's not unusual for payments to be delayed because they set a schedule and sell sequentially.

"That's right. Something seems off."

"What is it?"

"It's a large volume that's hard to sell in a short period. How could they have bought it in a short period?"

If you reverse the statement that it's hard to get a fair price when selling in a short period, it means it's also hard to buy at a fair price in a short period.

Local governments or public institutions issue bonds when they undertake large-scale projects.

Companies that buy or receive these bonds as payment wait until maturity to be repaid, or sell them on the market to quickly secure liquidity.

The Premus Fund buys such bonds to generate returns.

The problem is that there aren't many AAA-rated bonds with short maturities that are sold at a discount.

"The interest rate on bonds is fixed, but the price fluctuates. If they bought a large amount of this product in a short period, the price would have skyrocketed, and the return rate should have dropped, right?"

"That's because the management team is exceptionally skilled."

I nodded.

"Is that so? Then there's no problem. It's starting to boil, shall we eat?"

But she didn't move her chopsticks. She must have noticed something by now.

No one was unaware of the Premus situation before it exploded. Someone within DA Securities had noticed the problem.

It was her.

After hesitating for a moment, Sung Yuna put down her chopsticks and said,

"I'm currently investigating IPNK."

I struggled to recall.

"Manager Kim Myung-hoon's case, right?"

"Right."

Manager Kim Myung-hoon of the trading department bought IPNK and incurred significant losses.

Currently, the risk management department is investigating whether there was any corruption related to this. It's not uncommon for traders to collude with market manipulators to manipulate stock prices, such as buying overpriced shares from company executives in exchange for kickbacks, intentionally causing losses to the company.

"IPNK issued a large amount of CBs just before the trading suspension, and they were all sold out."

CB stands for Convertible Bond.

It's a corporate bond that can be converted into shares of the company after a certain period.

"Have you confirmed who bought them?"

She shook her head.

"No, but there's one thing that bothers me."

"What is it?"

"Lim Tae-won, an outside director of IPNK, is also the deputy president of Premus."

I feigned surprise.

"Really?"

I already knew this.

After the incident, I learned that she had written a report much earlier than I did, pointing out issues with the Premus Fund's asset purchases and suggesting an audit.

According to her report, she became suspicious of the Premus Fund while investigating IPNK.

"Is there a possibility that the Premus Fund bought those CBs?"

"No way. The Premus Fund doesn't invest in mezzanine."

Even though she said no, the suspicion was already there.

I fanned the flames of her suspicion.

"Recently, not only KOSDAQ but also private companies' private bonds have been sold out. Paradise Peak, Eight Cash, YMC Money, Nine Orion, and so on. These companies have one thing in common."

"What is it?"

"Lim Tae-won and other Premus Asset Management officials are registered directors."

She looked surprised.

"Really?"

I quickly pressed on.

"Is the list of assets that the Premus Fund bought really accurate? Is there a possibility that they claimed to buy public institution receivables but actually bought other assets?"

Sung Yuna's eyes widened.

"Are you serious?"

"In my opinion, the reason they are raising additional funds now is because there's a problem with the management."

"Does that make sense?"

Actually, it doesn't.

If you understand the structure of a fund, you would know that this is impossible.

When a customer buys a fund from a securities company, the money in the customer's account is transferred to the securities company's account.

The securities company doesn't directly give this money to the asset management company but instead entrusts it to a custodian institution for management.

The asset management company trades the fund's assets through this custodian institution.

In other words, when buying a bond A, they don't buy it directly but place a buy order for bond A with the custodian institution, which then buys and holds the bond.

The same applies when selling.

Even though it's cumbersome, they trade this way to prevent embezzlement or misappropriation by the asset management company and to safely manage the fund's funds.

However, there are loopholes.

"The administrative, custodian, and sales institutions don't share business information. By manipulating documents in the middle, it's possible to deceive. For example, buying B but reporting to the sales institution that A was bought."

"That's... "

She seemed to be searching for the right words but couldn't find them.

"It's fraud."

That's why DA Securities went bankrupt.

In theory, no matter how big the fund's loss, it's the investor's loss, not the securities company's.

The only case where this is possible is fraud.

If it's proven to be fraud, someone has to compensate the investors.

"You know, private funds are outside the regulatory and supervisory scope of the authorities. The sales institution only receives a few pages of management reports. Has DA Securities ever verified the asset list in the year they've been selling it?"

Originally, private funds were investment products for corporations and a few high-net-worth individuals.

However, with the minimum investment amount lowered from 500 million won to 100 million won and the recruitment regulations relaxed, they are now easily found at bank and securities company counters.

There are about 200 private fund companies in Korea, managing over 400 trillion won.

Although they have become popular and accessible to the general public, they are still in a regulatory blind spot.

I handed her the materials I had brought.

"I picked out a few suspicious ones. Just confirm if these transactions actually took place."

Sung Yuna looked at the materials I gave her.

As a new employee like me, it would be difficult for her to conduct an investigation on her own. But she could certainly find out through other channels.

Fortunately, she nodded without asking more questions.

"Got it."

* * *

After work, Sung Yuna went home.

When she opened the front door, her mother, sitting in the living room, asked,

"Why are you so late?"

"I was working overtime."

"You're in your prime. Don't just work; date a bit. You'll regret it later."

"I'm busy these days."

"No matter how busy you are, people who want to date always find a way."

That's true.

At the company, I often hear about who's dating whom.

"Is there anyone at the company you like? Anyone who likes you?"

Sung Yuna laughed sarcastically.

"Why are you like this? My daughter is so popular."

"If you find someone you like, you should hold on tight. If you hesitate, someone else will take them. If I hadn't confessed to your father, you wouldn't have been born."

"Sure, sure."

She went to her room, took a shower, and lay on the bed without drying her hair.

Sung Yuna's mind was filled with what Han Mi-ru had said earlier.

While investigating IPNK, she had thought something was off. But could it be related to the Premus Fund?

In the financial industry, where information is life, asset management companies don't fully disclose all information to sales institutions. Inflating returns or hiding a bit of bad debt is a common practice.

'But this is more than that, right?'

Although they were colleagues, until recently, she only knew Han Mi-ru by name. Now, she vividly remembered her expressions and eyes.

She looked confident, as if she knew something.

'Is what she said true?'

It's worth investigating.

* * *

The next day.

I passed the time and left work promptly at 6 PM. I then went to a cafe a bit far from the company and drank coffee.

Just as I finished my coffee, a young woman in her early 20s wearing a suit entered the cafe.

I raised my hand.

"Over here."

Sung Yuna saw me and came over to sit opposite me. Although we work in the same building, this was the first time we met outside of work.

"Did you wait long?"

"About an hour. I left work on time."

She said as she sat down.

"All the assets Premus bought are AAA-rated bonds, and there are no bad assets."

"Really?"

She handed me the materials.

"On paper, yes. But last month, they bought an additional 100 billion won worth of bonds, and there's no record of such a large transaction during that period. The report also doesn't specify which company's bonds they bought."

"Is that so?"

This is absurd. The buyer says they bought it, but there's no seller.

"Also, among the bonds they hold, there's a bond issued by Niedersachsen with a maturity in June next year, but Niedersachsen never issued a bond with that maturity."

"So they bought a bond that doesn't exist."

All of this was in the report she wrote later.

But it was all ignored. She was later transferred to a branch and left the company, which saved her from the fire disaster.

In a way, it was a blessing in disguise.

I said, as if deducing something I already knew,

"There must have been a problem with the management of the fund they raised last time. That's why they're having trouble with redemptions and are raising additional funds."

Sung Yuna frowned.

"Are they raising more investment funds to cover the losses? That's a Ponzi scheme."

Charles Ponzi died over 50 years ago, but he left a significant legacy. Ponzi schemes named after him continue to occur.

"The important thing is that DA Securities is complicit in the fraud."

To put it in a metaphor, it's like buying premium beef from a large supermarket, only to find out it's rotten pork.

The supermarket might argue that they were deceived by the supplier, but it's their responsibility to properly inspect and display the products.

Think about it logically.

If you bought a bond fund, but it turned out to be a stock fund, and you thought it was invested in the U.S. market, but it was actually invested in the Venezuelan market, and you bought a DLS based on German government bond rates, but it turned out to be based on Brazilian government bond rates, would anyone in their right mind trust DA Securities?

I looked at her and said,

"The Premus Fund is still being sold. We need to stop it before something bigger happens."

"What do you plan to do?"

"If the Premus Fund has serious bad debts and they're covering it up, the larger the fund, the greater DA Securities' losses. The only way to minimize the losses is to expose it as soon as possible."

If we expose it now, compensation will still be possible.

Then, victims who can't get their money back won't drive trucks loaded with toxic substances into the headquarters.

Sung Yuna said to me,

"But it's not certain yet. Even if they did invest in bad assets, the scale is still unknown."

I said firmly,

"We'll find out when we investigate."

She frowned and bit her lip slightly.

"Are you going to report it to your superiors?"

"No. The person who brought the Premus Fund to DA Securities is Executive Yang Jeong-wook. As long as he's involved, there's no way they'll investigate. Even if they recognize it's a fraud, they'll hide it until he can avoid responsibility. It's practically impossible to expose it within the company."

"Surely not... "

In fact, all three of her reports were ignored.

It was later revealed that by the time of her last report, the company was already aware of the problem to some extent. During that time, those who could leave did, and related personnel were moved, and traces of Executive Yang Jeong-wook's involvement were erased.

"Touching the Premus Fund is like touching Executive Yang Jeong-wook's sore spot."

"Is no one going to touch the sore spot of the next chairman?"

I shook my head.

"Not necessarily. I will."

"..."

Executive Yang Jeong-wook abandoned the customers he harmed and the company and employees he worked for.

I can't let such a person become the head of a financial group.

When the incident breaks, Executive Yang Jeong-wook will try to delay the investigation and escape. We must make him take responsibility.

Sung Yuna said worriedly,

"What will happen to DA Securities?"

I've been working for two more years after I joined, and I've formed relationships with many people in the company.

Among them, there were good and bad people, but they were all hardworking employees supporting their families. They all became unemployed when the company went bankrupt.

What did they do wrong?

"I need to find someone who can help."

"Who?"

Who would benefit the most if there were a problem with Executive Yang Jeong-wook?

I hesitated to say the name.

"I'll tell you later."

Chairman Yang Hyun-sung has one son and one daughter. Until now, it was assumed that Executive Yang Jeong-wook would inherit the group.

But...

What will happen if the Premus incident breaks now?