Designer of the Questionable Italian Healthcare Fund Established a Company in Singapore, Then Went Out of Business

[경향신문]

Kim Deuk-ui, representative of the Solidarity for Financial Justice holds a press conference before filing a report on the Italian Healthcare Fund fraud on September 9, 2021 in front of the Financial Crime Investigation Division at the Seoul Metropolitan Police Agency in Mapo-gu, Seoul. The Solidarity for Financial Justice and a group of victims of the Italian Healthcare Fund first filed a report at the Prosecution Service in July 2020, but they filed an additional report at the police this day claiming there was no progress in the investigation. Yonhap News

Prosecutors investigating allegations surrounding the “Italian Healthcare Fund” (a.k.a. Italian Fund) confirmed that Shin, a former employee at Hana Bank who led the sales of the fund, went to Singapore immediately after the sale of the Italian Fund ended, and established a personal investment company. Earlier, the government suspended the repurchase of the fund freezing investments of nearly 110 billion won. Prosecutors suspect Shin may have established his own company for money laundering purposes.

According to the Kyunghyang Shinmun coverage on November 28, the Financial Investigation Division 2 (chief prosecutor Kim Rak-hyeon) of the Seoul Southern District Prosecutors’ Office confirmed that Shin had established the investment consulting firm, Advance Alpha PTE in Singapore in October 2019 and closed the business in April this year. Shin owned 100% of the shares of this company and had employed three South Korean nationals.

In May 2017, Shin was recruited for his professional experience and led the design and sales of the Italian Fund in the Investment Products Division at Hana Bank. He left the bank in September 2019, a week after the sales of the fund ended and left the country for Singapore. Shortly afterwards he established his own company there. The prosecutors have booked him for fraud and for violating the Financial Investment Services and Capital Markets Act.

The Italian Healthcare Fund is a fund of funds (FOF) that invested in overseas funds that invested in trade receivables for medical expenses that Italian hospitals were expected to receive from the Italian government. Hana Bank promoted the fund claiming that returns were guaranteed “as long as the Italian government didn’t collapse,” and claimed the fund would mature in thirteen months and could provide annual earnings of 5%. In this way, the bank managed to sell 150 billion won worth of the fund, but in reality, the fund had a maturity of 5-6 years and invested in poor receivables difficult to recover. In the end, financial authorities suspended the repurchase of 110 billion won of investments at the end of 2019, and it remains suspended to this day.

A group of victims of the Italian Fund and the Solidarity for Financial Justice, which reported Hana Bank and Shin to the Prosecution Service, suspect Shin split the 4.7 billion won sales charge for the Italian Fund with the asset management firm, Hannam Advisors. Hannam Advisors was a company never mentioned in the Italian Fund product description, but its existence was first revealed when Hana Bank conducted an internal investigation into the case.

Shin sent an e-mail to all the private bankers in May 2019, asking them to aggressively sell the Italian Fund, since the fund’s maturity had been reduced to thirteen months from the initial 24 months and early redemption was possible. In 2017-2018, the Italian Fund had only drawn about 30 billion won, but after Shin’s request, the sales of the fund soared to over 150 billion won.

The prosecutors launched an investigation and conducted a search and seizure of the Hana Bank head office on November 5, but reportedly have yet to identify the whereabouts of Shin.