Court Rules Hyundai Motor Securities Must Pay 9 Billion Won to Chung Mong-koo Foundation Over U.S. Resort Investment Loss in Appeal

An appellate court has maintained its ruling that Hyundai Motor Securities must pay approximately 9 billion won in damages to the Chung Mong-koo Foundation, which suffered losses amounting to 15 billion won from an investment in a U.S. Las Vegas resort.

On October 15, the 14-1 Civil Division of the Seoul High Court (High Court Judges Nam Yang-woo, Hong Seong-wook, and Park Jae-woo) dismissed the appeals from both sides in the appeal trial of the damages suit filed by the Chung Mong-koo Foundation against Hyundai Motor Securities, upholding the ruling in favor of the plaintiff.

Hyundai Motor Securities had entered into a discretionary investment agreement with the Chung Mong-koo Foundation and, while managing the foundation's funds, recommended investing in a fund related to a complex resort development project in Las Vegas, U.S., in 2018.

Accepting the recommendation, the Chung Mong-koo Foundation invested approximately 15.877 billion won, but later suffered a loss of 15.109 billion won as construction was suspended due to the spread of COVID-19.

In 2021, the Chung Mong-koo Foundation filed a lawsuit, claiming that Hyundai Motor Securities breached its duty of care by failing to notify them of the possibility of losses during the investment recommendation process.

Meanwhile, Hyundai Motor Securities argued that the Chung Mong-koo Foundation also had experience investing in alternative real estate investment products, was aware of the meaning of the investment at the time, and that they had explained all investment risk factors within the foreseeable scope.

The first instance court ruled that while Hyundai Motor Securities did not intend to deceive the Chung Mong-koo Foundation, it failed to sufficiently explain the investment risks and the possibility of recovering the principal, ordering Hyundai Motor Securities to pay 9.0654 billion won, which corresponds to 60 percent of the loss.

The second instance court also dismissed the appeal, noting that Hyundai Motor Securities' investment proposal stated, "Even in the worst-case scenario, there is no problem in recovering the principal upon disposal of collateral." The court stated, "They should have sufficiently explained that the possibility of recovering the investment could decrease in the event of a development project failure, but there is no data to support that this was explained to an extent that the plaintiff, as a retail investor, could understand."

(Photo: Provided by Hyundai Motor Securities, Yonhap News)
※ Please note: This article was translated by AI and may contain errors.