The controversy surrounding the introduction of single-stock leverage ETF products, which have been pointed to as a cause of extreme volatility in the domestic stock market, is escalating into a legal battle.
Former Seoul Metropolitan Councilman Lee Jong-bae announced today (August 3) that he has filed a complaint with the Supreme Prosecutors' Office against Kim Yong-beom, Chief Presidential Secretary for Policy, on charges of ordering the introduction of single-stock leverage ETFs.
Former Councilman Lee claimed, "In an interview with the Hankyoreh in January, Chief Secretary Kim asked, 'Why is something allowed on Nasdaq that cannot be done in Korea?' Right after that interview, Financial Services Commission Chairman Lee Eok-won permitted the launch of single-stock 2x leverage ETFs."
He argued that although financial authorities initially anticipated severe side effects and planned a rollout in the second half of the year after sufficient review, the products were hastily introduced right before the election due to pressure from the presidential office.
Former Councilman Lee added, "Financial Supervisory Service Governor Lee Chan-jin reportedly stated during a regular press briefing on June 22 that 'it is true that we prepared the leverage ETF introduction in a rush at the time,' and FSS Governor Lee avoided giving a direct answer when asked during a National Assembly appearance whether there was pressure from the presidential office."
"Pushing forward with the product launch recklessly, ignoring warnings from experts and the industry, and creating countless victims is a state-inflicted stock manipulation and an unprecedented state-affairs scandal," he said, calling for a forced investigation into Chief Secretary Kim.
Political offensives are also intensifying.
The People Power Party has defined this incident as a policy failure by the government and officially decided to push for a parliamentary investigation into the entire process of introducing leverage ETFs.
People Power Party Floor Leader Chung Jeom-shik sharply criticized, "The government drove the South Korean stock market past a 'roller-coaster Kospi' into a 'bungee-jumping domestic market,'" and demanded, "Investigate the person responsible for pushing the rollout and immediately dismiss Chief Secretary Kim."
With criminal complaints and a push for a parliamentary investigation added to the mix over the background of the introduction, the friction surrounding leverage ETFs is expected to grow further.
Reported by Lee Hyeon-yeong | Video by Lee Eui-seon | Graphics by Yook Do-hyun | Produced by SBS Digital News
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