FSS ordered Woori and IBK to repay half of investors' Lime fund losses

On 24 February 2021 South Korea's Financial Supervisory Service ordered Woori Bank and the Industrial Bank of Korea to compensate end-investors for at least half of their damages from the ₩1.7 trillion ($1.5 billion) misselling scandal around hedge fund Lime Asset Management, holding the banks accountable for 'poor efforts in the exercise of their duties to protect investors'.

The day before, the FSS's Financial Dispute Conciliation Committee ordered specific repayments: Woori must compensate an 82-year-old man who had sought to protect his principal for 78 percent of his investment, frozen since 2019, and repay 68 percent to a corporate investor in asphalt manufacturing; IBK must repay 65 percent of the losses of a retiree with zero investing experience who had sought a time deposit.

The committee found the banks' misselling practices ranged from manipulating a client's risk tolerance to failing to explain the risks the products carried. Compensation ratios vary with the victim's age, investing experience and how lax the bank's documentation was. Woori had sold ₩270.3 billion of Lime funds and IBK ₩28.6 billion; the committee had handled over 670 victim cases.

Lime itself froze all its assets in 2019, citing illiquidity, refusing redemption requests from over 4,000 individuals and 580 enterprises; it was found to have run a Ponzi scheme, misrepresented performance and colluded with sellers to hide losses. Its licence was revoked in December 2020, and in January 2021 ex-chief investment officer Lee Jong-pil was sentenced to 15 years and fined ₩4 billion. KB Securities, which sold ₩58 billion, had been ordered in December to repay 40–80 percent of clients' principal.

Selling ₩298.9 billion of Lime funds through bank channels put hedge-fund risk in front of unsuitable retail customers.

Manipulating risk-tolerance assessments converted suitability paperwork into a formality.

An 82-year-old seeking principal protection and a retiree wanting a time deposit are textbook mis-sale profiles.

Banks profit from distribution commissions, so regulators hold them to the duty to explain and screen.

Distribution banks inherit the blow-up of whatever they sell: suitability screening is the only defence that still counts after a fund freezes redemptions.

Woori, IBK and KB Securities had agreed to compensation under the authorities' final conciliation before Lime's total losses were defined; the three were among 19 sellers of Lime funds.