Korea’s largest hedge fund is under probe for involvement in an alleged US Ponzi scheme

Lime Asset Management, the large Korean hedge fund, is accused of continuing to market a trade finance fund when it knew the investments could land in trouble.

Lime had raised client funds amounting to 243.6 billion won and a loan of 350 billion from Shinhan Investment. It invested 40% of these funds in a U.S. hedge fund called Structured Trade Finance Fund. New York-based investment adviser International Investment Group (IIG) managed the said fund.

Troubles at IIG

On November 26, the U.S. Securities and Exchange Commission (SEC) revoked the registration of IIG because it engaged in Ponzi schemes. Allegedly, IIG concealed defaulted loans in its hedge fund and sold about $60 million in fake loan assets to other clients.

SEC also then imposed an asset freeze on IIG.

Lime Asset investors in hot water

Now that the SEC has frozen IIG’s assets, Lime’s investment of 240 billion won may turn bad. Additionally, Lime allegedly continued to raise funds from new investors, knowing full well the situation at IIG. Further, it repaid old investors with money from new investors.

Meanwhile, investigations by prosecutors are going to be hampered as Lee Jong-pil, Lime’s former chief investment officer, has fled.

Meanwhile, Lime has halted redemption of funds amounting to 1.3 trillion won.

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