South Korea’s top financial supervisor has admitted to lawmakers that regulators pushed single-stock leveraged ETFs through review to meet a launch date.
The Financial Supervisory Service (FSS) chief Lee Chan-jin is now the third senior official to admit fault for products that cost retail investors trillions of won.
What did the FSS chief admit to?
The Financial Supervisory Service chief Lee Chan-jin admitted at the National Assembly’s Political Affairs Committee audit on Monday that the FSS finished its work with single-stock leveraged products before the exchange was done, instead of allowing the ETF listing to clear a Korea Exchange preliminary review first.
Even after this admission, it is still unclear who ordered the funds to be sold. Critics have named Kim Yong-beom, the former presidential policy chief; Lee Eog-weon, chairman of the Financial Services Commission; and Lee Chan-jin himself.
People Power Party lawmaker Park Dae-chul asked Lee if the steps had ever been done in reverse order before, and his response was that regulators had checked and it seemed this was the first time.
Lee said the speed was due to a deadline. After the FSC announced a listing schedule in mid-April, he said that the regulators “moved quickly through the review” in order to keep up.
May 27, which the FSC set as the launch date, was also the day that 16 funds went on sale with the aim to rise or fall by double the daily move of Samsung Electronics (KRX; 005930) or SK Hynix (KRX; 000660) shares.
The elections were held one week later, on June 3. Opposition lawmakers have repeatedly said the launch was timed to come just before the vote.
Lee said at a June 22 briefing that he felt he should have blocked the launch and that the products appeared to have “only fattened securities firms.”
On October 8, FSC Chairman Lee Eog-weon apologized at his own audit, saying he “deeply regret[s] the various losses, concerns, and damages that have resulted.”
A market note from Citi’s Mohamed Apabhai, head of Asia-Pacific trading strategy, put Korean retail losses at roughly $38.7 billion, or 58 trillion won, by late July.
The FSC chairman dismissed a separate 54 trillion won ($36.5 billion) figure from an overseas bank as unofficial, but the FSS’s own data confirmed 2.3242 trillion won ($1.57 billion) in realized trading losses at 10 financial investment firms between the May 27 launch and August 14.
Did the FSC anticipate retail losses?
The Finance Ministry, the Financial Services Commission (FSC), and the Bank of Korea all told lawmaker Kim Sang-hoon’s office that they never calculated how much the funds would reduce money leaving Korea or increase investment at home. Yet that was the FSC’s main argument when it first proposed the change on January 30.
The Cabinet approved the rule on April 21 through an enforcement decree, so the National Assembly never voted on it.
Within weeks, trading got out of control. On July 16, regulators stopped new funds from being listed. From July 31, they raised the minimum cash needed to trade the funds from 10 million won (about $6,750) to 30 million won ($20,250). Trading then dropped about 97% from its June peak.
Cryptopolitan previously reported that Korean traders have moved their money abroad in order to find leverage that domestic rules do not allow, using KORU-linked perpetual futures on Binance, Bybit, OKX, and KuCoin that can run to 150 times the Kospi’s daily swing.
Tiger Research, working with Chainalysis, estimated about 700 trillion won left domestic exchanges between 2021 and 2026. Licensed Korean crypto exchanges shed 35% of their won deposits in the first half of 2026.
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