Primus Fund (4)
We headed to a restaurant near the company.
“A budaejjigae place.”
“This is supposed to be a good one.”
It was the same place Senior Dongho had dragged me to before. After that, I kept coming back a lot.
It was still a little before lunch, so the place was quiet. In another few minutes, office workers would start pouring in.
“So what did you want to talk about?”
“You know about the Primus Fund, right?”
“Of course.”
“I’m writing a recommendation report on it, but something about it feels off.”
At my words, her hand stopped in the middle of pouring water.
“What feels off?”
“Well....”
I roughly explained what I’d reported to the department head.
“You mean it might not just be inflated returns, but that the assets themselves could be a problem?”
“Yes.”
“Why do you think that?”
“Right now, there are redemption requests from institutional clients totaling 200 billion won, but the redemptions are being delayed.”
“Couldn’t that just be because it takes time to sell the bonds they’re holding?”
If you try to unload a large amount of bonds or stocks all at once, you won’t get full value for them.
When a flood of redemption requests comes in, they set a deadline and sell the assets in stages, so a delay in payment isn’t particularly strange.
“Exactly. That’s what doesn’t make sense.”
“What doesn’t?”
“If the volume is so large that it’s hard to sell quickly, how did they buy it so quickly in the first place?”
To turn that around, if something is hard to sell at full price in a short period, then it’s just as hard to buy at full price in a short period.
When local governments or public institutions carry out large-scale projects, they issue bonds.
Companies that buy those bonds, or receive them as payment, sometimes sell them on the market instead of waiting for maturity, just to secure liquidity faster.
The Primus Fund made money by buying those kinds of bonds.
The problem was that if they were AAA-rated bonds with not much time left until maturity, there usually wasn’t much discounted supply to buy.
“The issue rate on bonds is fixed, but the price changes constantly. If they bought a huge amount of a product like that over a short period, the price would have shot up, which should’ve lowered the yield, right?”
“That probably just means the executives are that good at sales.”
I nodded.
“Is that so? Then I guess there’s no problem. It’s starting to boil, so should we eat?”
But she didn’t move her chopsticks.
By now, she’d probably realized something.
It wasn’t that nobody knew before the Primus scandal broke. There were people inside DA Securities who had noticed something was wrong.
She was one of them.
After hesitating for a moment, Sung Yoon-ah put down her chopsticks and said, “Lately, I’ve been investigating EPNK.”
I strained to drag the memory back to the surface.
“That was Manager Kim Myeonghun’s case, right?”
“That’s right.”
Kim Myeonghun in the trading department had bought EPNK and taken a huge loss.
Right now, the risk team was investigating whether there had been any corruption connected to it. It wasn’t unusual for traders to work with market manipulators. Take bribes, then deliberately buy up the stocks that company executives were selling at inflated prices, damaging the firm on purpose.
“EPNK issued a large batch of CBs right before trading was suspended, and they were all sold out.”
CBs were convertible bonds.
Technically they were corporate bonds, but after a certain period they could be converted into shares of the company.
“Did you find out who bought them?”
She shook her head.
“No. But there’s one thing that bothers me.”
“What is it?”
“EPNK’s outside director, Im Taewon, is Primus’s vice president.”
I deliberately looked surprised.
“Really?”
Of course I already knew.
It was only revealed after the whole thing blew up later, but she had written a report calling for an audit long before I did, pointing out the suspicious asset purchases in the Primus Fund.
According to that report, while investigating EPNK, she became suspicious of the Primus Fund.
“Could the place that bought those CBs have been the Primus Fund?”
“No way. Primus doesn’t invest in mezzanine stuff.”
Even as she denied it, the suspicion had already taken root.
I fanned those embers.
“Lately, not just Kosdaq but private bonds issued by unlisted companies have been selling out all over the place. Paradise Peak, EightCash, YMC Money, NineOrion, and so on. They all have one thing in common.”
“What’s that?”
“Im Taewon and other Primus Asset Management people are listed as directors.”
She looked flustered.
“Are you serious?”
I pressed in quickly.
“Can we really trust the asset list Primus Fund claims to have bought? What if they said they were buying public-sector receivables, but were actually buying something else?”
Sung Yoon-ah’s eyes widened.
“Are you serious right now?”
“I think the reason they’re still raising new money is because the fund’s operation has already gone wrong.”
“That doesn’t make sense.”
It didn’t, really.
If you understood even a little about how a fund was structured, you’d know at once how impossible that was.
When a client bought a fund from a securities firm, the money in the client’s account moved into the securities firm’s account.
The securities firm didn’t hand that money directly to the asset manager. Instead, it deposited the funds with a custodial institution that managed the money in between.
The asset manager bought and sold fund assets through that custodian.
In other words, when buying Bond A, they didn’t buy it directly. They placed an order with the custodian to purchase Bond A, and the custodian bought and held it.
The same went for selling.
The reason they went through all that trouble was to prevent embezzlement or breach of trust by the manager and keep the fund’s money safe.
But even that system had a weakness.
“The administrator, the custodian, and the seller don’t share operational information with one another. If you manipulate the paperwork in the middle, you can fool people however you want. For example, buy B but report to the seller that you bought A.”
“That’s....”
She seemed to search for a softer word, but couldn’t find one and blurted it out as it was.
“That’s fraud.”
That was why DA Securities went under.
Normally, no matter how large the fund’s losses became, they were the investor’s losses, not the securities firm’s.
There was only one case where it could become the firm’s problem.
Fraud.
And once the fraud was exposed, someone had to compensate the investors.
“As you know, Yoon-ah, private funds sit outside the direct regulation and supervision of the authorities. Even the selling firm only gets a handful of management reports. DA Securities has been selling this fund for over a year now, but have they ever once verified whether the asset list was real?”
Originally, private funds were for corporations and a small number of high-net-worth individuals.
But the minimum subscription amount had dropped from 500 million won to 100 million won, restrictions on the number of investors had loosened, and now you could find them easily at banks and securities firms.
There were around 200 private fund management firms in Korea, with more than 400 trillion won under management.
They had become so common that ordinary people could access them, yet they still existed in the blind spot of regulation and oversight.
I handed her the documents I’d brought.
“I picked out a few suspicious ones. Just check whether these trades actually happened.”
Sung Yoon-ah studied the papers I’d given her.
Like me, she was a rookie, so it would be hard for her to investigate openly on her own. But if it was her, she’d still be able to find out through other routes.
Fortunately, she didn’t press me any further and simply nodded.
“Okay.”
After work, Sung Yoon-ah went home.
She opened the front door and stepped inside, and her mother, sitting in the living room, asked, “Why are you home so late?”
“Overtime, what else?”
“You’re in the prime of your life. Don’t just work; date someone too. You’ll regret it later if you don’t.”
“I’ve been busy lately.”
“No matter how busy you are, everyone who wants to date finds the time.”
That was true enough.
At work, it seemed like every other day there was some new gossip about who was seeing whom.
“There isn’t a man you like at the company? Anyone who likes you?”
Sung Yoon-ah snorted.
“What’s with you? Your daughter is pretty popular, you know.”
“If you meet someone you like, hold on tight. If you hesitate, someone else will take them. If I hadn’t confessed to your dad, you wouldn’t even be here.”
“Yes, yes.”
Back in her room, she showered, then collapsed onto her bed without even drying her hair.
What Han Miru had said that afternoon kept circling through her mind.
She had thought something was off while investigating EPNK. But that it might be connected to the Primus Fund?
As vital as information was to a financial firm, a manager did not reveal every detail to the seller with perfect transparency. Inflating returns or hiding a bit of weakness was, in a sense, standard practice.
But he said it was more than that.
They had been entry-level colleagues, and until not long ago she had barely known his name. But now she remembered his expression, his eyes, in vivid detail.
He had looked utterly convinced, as if he knew something.
Was what he said really true?
It was worth checking.
The next day.
I killed time at work as usual, then the moment it hit six, I clocked out without caring who might notice. After that, I sat in a café a little away from the company and drank coffee.
By the time I’d finished, a woman in her mid-twenties wearing a suit came into the café.
I lifted a hand. “Over here.”
Sung Yoon-ah saw me, came over, and sat down opposite me. We were in the same building and the same class of new hires, but this was the first time we’d met separately outside work.
“Have you been waiting long?”
“About an hour. I left right on time.”
As she sat, she said, “Everything Primus bought was listed as AAA-rated bonds. There’s nothing in the paperwork about distressed assets.”
“Really?”
She handed me the documents.
“On paper, yes. But just last month they bought an additional 100 billion won worth of bonds, and there’s no comparable transaction volume anywhere around that time. The report also doesn’t say which company they bought the inventory from.”
“I see.”
The absurdity of it was simple: the buyer said they bought it, but there was no seller saying they sold it.
“And among the bonds they’re holding, there’s one issued by the state of Lower Saxony that matures next June—but Lower Saxony never issued a bond maturing then.”
“So they bought a bond that didn’t even exist.”
These were all things she would later include in her report.
But every one of them was brushed aside. After that, she was reassigned to a branch and left the company, which was how she escaped the fire disaster.
In its own way, it was a blessing in disguise.
I spoke as though I were deducing something I already knew.
“Something must have gone wrong with the fund they raised last time. That’s why redemptions became difficult, so they started taking in more subscriptions.”
Sung Yoon-ah frowned.
“You mean they’re pulling in more investment money to cover the losses? That’s a Ponzi scheme.”
Charles Ponzi had died more than fifty years ago, but he’d left humanity a lasting legacy. Even now, the fraud that bore his name was still alive and well.
“What matters is that DA Securities is helping them do it.”
To put it in another way, it was like buying beef at a big-box store because it was advertised as premium-grade only to discover later that it was rotten pork.
The store would claim it was fooled by a supplier that lied to it, but the real responsibility lay with the store for not checking properly before putting it on display and selling it.
Think about it logically.
You bought a fund that was supposed to invest in bonds, but it was actually a stock fund. You thought you’d bought a fund investing in U.S. equities, but it was actually pouring money into the Venezuelan market. You bought a DLS tied to German government bond yields, only to find out the underlying asset was Brazilian bond yields.
Who in their right mind would trust DA Securities after that?
I looked at her and said, “Right now, the Primus Fund is still being sold. We have to stop it before something even bigger happens.”
“What exactly are you planning to do?”
“If the Primus Fund really has severe problems and they’re using new subscriptions to cover old ones, then the larger the amount they raise, the bigger DA Securities’ losses become. The only way to reduce the damage is to make it blow up as early as possible.”
If it blew up now, compensation would still be possible.
Then maybe there wouldn’t be any victims driving a truck full of toxic chemicals into headquarters because they couldn’t get their money back.
Sung Yoon-ah said, “But nothing’s confirmed yet. Even if it’s true they invested in distressed assets, we still don’t know the scale.”
I answered firmly, “We’ll know once we crack it open.”
Her brow furrowed, and she bit her lip slightly.
“Are you going to report it straight up?”
“No. The one who brought Primus Fund into DA Securities was Executive Director Yang Jeong-uk. As long as he’s involved, no one’s going to investigate just because we report it. Even if he realizes it’s fraud, he’ll hide it until he can escape responsibility. In practice, there’s no way to blow this open from inside the company.”
“No way....”
In fact, the three reports she filed were all ignored.
And according to what was later revealed, by the time she submitted her final report, the company had already recognized there was a problem to some extent.
By then, the people who could slip away had slipped away, the related parties had shifted positions, and every trace linking back to Executive Director Yang Jeong-uk had been erased.
“Touching the Primus Fund is basically the same as touching Executive Director Yang Jeong-uk’s reverse scale.”
“You mean no one would dare touch the crown prince’s reverse scale?”
I shook my head.
“That’s not it. I’m going to touch it.”
“...What?”
Executive Director Yang Jeong-uk abandoned the customers harmed by his actions and abandoned the DA Securities employees he’d once worked alongside.
There was no way I could let a man like that sit in the top seat of a financial group.
Once this blew up, Yang Jeong-uk would waste time trying to wriggle out through the investigation. I had to make sure he took responsibility. No matter what.
Sung Yoon-ah asked with concern, “Then what happens to DA Securities?”
Right now she was still a new hire, but my own working life continued for two more years after this, and during that time I built ties with many people inside the company.
Some of them were good to me, some of them weren’t, but all of them were employees working hard for their families. The company went under and they all became unemployed, but...
What exactly had they done wrong?
“I’ll need to meet someone who can help.”
“Who?”
Who would benefit the most if Executive Director Yang Jeong-uk ran into trouble?
I started to say the name, then hesitated.
“I’ll tell you later.”
Chairman Yang Hyeon-seong had one son and one daughter. Up until now, it had been taken for granted that Executive Director Yang Jeong-uk would inherit the group.
But....
What would happen if the Primus scandal broke right now?