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A look into the BBK scandal

April 6, 2010 - 00:37 By
The investment fund BBK was founded by Kim Kyung-jun in April 1999. BBK was an offshore company incorporated in the British Virgin Islands.
In November 1999, BBK registered a Korean subsidiary with the Financial Supervisory Service. B stands for Bobby, Kim`s friend; the other B is for Bora Lee, Kim`s wife, and the K represents Kim himself.
Among the firm`s investors, DAS invested 19 billion won ($21 million); Samsung Life Insurance, 10 billion won; Oriens, 10 billion won; Daeyang ENC, 5 billion won; and Simmtech, 5 billion won.
In October 1999, Lee Myung-bak returned to Korea from the United States after serving as a guest researcher for one year at George Washington University.
He went to the United States in November 1998 after resigning from parliament after he was found guilty of violating election laws during the 1996 campaign.
In February 2000, Lee and Kim co-founded LK-eBank, an online financial holding company with each investing 3 billion won. LK-eBank invested 3 billion won in BBK. L and K stand for Lee and Kim, respectively.
In February 2001, Lee and Kim established a securities brokerage firm called EBK. Lee, Kim, Lee`s brother and brother in-law, and Kim`s sister, Erica Kim, are reported to have invested in the firm.
The Financial Supervisory Service found in March 2001 that BBK had falsified investment reports to clients.
The FSS then rescinded BBK`s operating license on April 27. Lee had closed EBK on April 3, and resigned as CEO of LK-eBank on April 18. He then severed all ties with Kim.
On April 26, Kim founded a investment company called Optional Ventures. He allegedly spread false rumors that the Kosdaq-listed firm would be acquired by a foreign company. Optional Ventures` stock prices jumped four-fold, from 2,000 won per share to 8,000 won. In the process, Kim is suspected of having misappropriated company funds amounting to 38 billion won.
MAF (Millennium Arbitrage Fund), an off-shore fund which Kim controlled, is claimed to have been a foreign buyer of Optional Ventures. Kim`s purported stock manipulation is estimated to have affected over 5,200 individual investors, causing financial losses to the tune of some 60 billion won.
Simmtech, which invested 5 billion won in BBK, asked for a court order in October 2001 to provisionally seize property owned by Lee in compensation for losses incurred. The court ruled in favor of Simmtech.
Simmtech filed a lawsuit against Lee and Kim for fraud in November 2001. Accordingly, prosecutors issued an overseas travel ban on Kim. However, Simmtech retracted its lawsuit after it recouped its money. Kim managed to flee to Los Angeles on a forged passport on Dec. 20, 2001.
In the wake of his allegedly illegal financial wheeling and dealing, DAS failed to recoup an investment of 14 billion won. Lee also claims to have lost 3 billion won.

By Song Sang-ho