Investors who suffered losses from bonds issued by Central Group are calling for a thorough investigation by the Financial Supervisory Service (FSS), citing inadequate verification by financial firms.
On July 13, the 'JTBC and Central Group Corporate Bond Victims Joint Legal Team,' composed of law firms including Changcheon and attorney Lee Bok-hyun, held a press conference at the Gwanghwamun Bar Association to highlight the status of damages and the poor verification by financial companies, urging authorities to conduct a comprehensive investigation.
During the briefing, the legal team announced that they submitted an initial opinion letter to the FSS's Financial Investment Inspection Division and Financial Consumer Protection Bureau on July 10, representing 250 applicants with damages amounting to 32.52 billion won.
According to the materials released by the legal team, JTBC was effectively in a state of complete capital impairment even before the bond issuance. As of the end of 2025, JTBC's total capital was 19 billion won, with a capital impairment rate of 96.7%. Excluding 154.4 billion won in hybrid capital securities that created an illusion of capital, the actual total capital was approximately -135.4 billion won. The legal team emphasized that there were indications of JTBC issuing 40 billion won in hybrid capital securities just before the financial statements were finalized in September 2025 to cleverly avoid reporting capital impairment.
The team particularly criticized the actions of Shinhan Investment Corp., the lead underwriter, as the most significant issue. Despite being fully aware of the risks outlined in their own due diligence report—such as capital impairment, years of accumulated losses, and reliance on short-term borrowings—Shinhan's investment prospectus concluded that 'the short-term liquidity risk is limited considering the potential support from affiliates' and 'principal and interest repayments are expected to be smooth.'
Meanwhile, Korea Ratings, the credit rating agency, stated in its credit report that it 'does not reflect the potential for affiliate support in times of crisis due to the overall financial burden on the group,' but Shinhan Investment Corp. completely disregarded this, the legal team criticized. They also revealed that Shinhan's on-site due diligence was replaced by a one-day phone meeting, and the entire process from signing the underwriting contract to payment was expedited within just three weeks.
The legal team argued that the poor verification by the securities firm transferred the risks directly to individual investors. They noted that the amount of participation in the demand forecast at the time of issuance was only 77 billion won, falling short of the planned issuance amount, with no participation from pension funds or banks. Most of the participating amounts were in the names of asset management companies, including individual investment accounts, and despite the shortfall in demand, Shinhan Investment Corp. increased the issuance amount to 93 billion won. Furthermore, just before the issuance, IR materials containing only positive forecasts, excluding risk factors, were distributed to individuals through KakaoTalk open chat rooms of investment management firms.
The legal team also claimed that Kiwoom Securities, which sold the bonds, failed to properly implement investor protection procedures by directly guiding and inducing investors to register for a do-not-call list.
According to the legal team, the confirmed victims so far include 211 individuals who directly purchased corporate bonds, 29 who included them in investment management, and 10 who bought hybrid capital securities, totaling 250 individuals with damages amounting to 32.52 billion won. Additionally, their own tally indicates that there are over 450 personal accounts related to Central Group, amounting to approximately 76 billion won, suggesting that the actual scale of damages is much higher.
While numerous individuals face the risk of losing their entire principal investment, the issuing company and financial firms have reaped substantial profits. JTBC raised 93 billion won despite the financial troubles, using 33 billion won as loans to its subsidiaries, and just two and a half months before defaulting, its affiliate Central Holdings exercised a cash call option on 20 billion won in hybrid capital securities it held.
The legal team stated, 'While many individual investors have suffered significant losses, Shinhan Investment Corp., Kiwoom Securities, and JTBC have gained considerable economic benefits,' and they demanded that the FSS expand the scope of the investigation, consolidate complaints, and take measures to preserve evidence.
The legal team insists that investigations are necessary not only for Shinhan and Kiwoom Securities but also for Hanyang Securities, which underwrote the hybrid capital securities, brokerage firms involved in trading, small investment management firms, and credit rating agencies that assigned ratings. They also called for the swift consolidation of individual complaints already submitted and immediate preservation orders for key evidence that could easily be destroyed, such as messenger logs and trading records.
Previously, on June 12, JTBC declared a default after failing to repay 20.6 billion won in liquidity borrowings, triggering a financial crisis for Central Group. Subsequently, Central Holdings, Contentree Central, Central P&I, Megabox Central, and JTBC sequentially applied to the court for rehabilitation proceedings. The court accepted JTBC's application for the Autonomous Restructuring Support (ARS) program, postponing the initiation of rehabilitation proceedings for JTBC while deciding to proceed with the rehabilitation for the other four entities.
As legal battles began, bond investors appointed Lee Bok-hyun, a former FSS chairman and a lawyer from Changcheon, as their legal representative to respond.
* This article has been translated by AI.
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