The curious case of Woori Bank, an €8 billion lawsuit and an alleged letter from Deutsche Bank

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By:
Chris Wright
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A little-known plaintiff is alleging a truly enormous theft by Woori Bank. Everything about the allegations sets off alarms, and the testimony of Deutsche Bank will be crucial


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A lawsuit alleging the theft of €8 billion by Woori Bank, specifically accusing former chief executive Lee Kwang-Goo as the ringleader and with Deutsche Bank allegedly confirming the plaintiff's position, is working its way through the legal systems of South Korea and the United States.


It is among the strangest cases Euromoney has ever seen.

The allegation goes like this. The plaintiff is a group called AJ Energy LLC, registered in Nevada, which says it has a joint venture partner in Korea called NRG Ltd. The complaint states that in October 2015, NRG Ltd's UK partner, Hestiun Finance, transferred €3 billion to NRG Ltd on Woori Bank's common account through Deutsche Bank, for investment in Korean assets.

Woori, the complaint continues, denied ever receiving the funds. NRG complained to the Financial Supervisory Service in Seoul, only to receive a written denial from Woori about the funds in August of that year.

Despite this, the complaint alleges, a further €5 billion was then transferred to AJ Energy's offshore account at Woori Bank in February 2017, to invest in the Korean shipping industry. Woori again denied receiving the funds. 

Since then NRG has sued Woori Bank for the original €3 billion in the Seoul Central Court, with five court hearings having followed without resolution. So in March this year, AJ Energy filed a complaint in the New York Supreme Court suing Woori Bank for the combined €8 billion plus damages.

At first glance, everything about this case throws up a red flag. 

Let's start with the amount: €8 billion? To be invested just in Korea? And who sends €5 billion to exactly the same place that they claim has just stolen €3 billion from them? €8 billion is roughly the same as Woori Bank's entire market capitalization.

Then there's the plaintiffs. Barely any information is available on AJ Energy LLC: it has no website that we can find (AJ Energy Consultants, which does have a website, is a completely different company, based in Essex). The Nevada Secretary of State's Office shows that AJ Energy LLC was incorporated only in April 2010 and has just four officers.

Hestiun Finance, which is supposed to have sent the first €3 billion, is stranger still. Companies House in the UK says it was dissolved in May 2016. Its notice of dissolution can be seen here, and its last annual return - disclosing it has just two shares worth £1 each - here

News searches for Hestiun Finance bring up stories about a €250 million agreement to build an aircraft factory and airport in Romania with Russian money, with Hestiun being used as the financial platform for Vitalie Usturoi, a controversial Russian figure. The deal collapsed over money-laundering concerns, according to the Romanian arm of the media group Euractiv; the first instalment of money for it was blocked by Romanian bank BRD. No allegations were made direct against Hestiun in that article.

Euromoney reaches Ruth Cam, attorney at law, in the Santa Ana district of California; she has been appointed to represent AJ Energy. When these red flags are put to her she says she too would ordinarily have been suspicious of the sum of money involved but has known the Bobarykin family - of whom two, Alexander and Rita, are listed as managers of AJ Energy with an address in Orange, California - for many years and so trusted them and considered "absolutely" legitimate the claim to have had €8 billion in investments. 

"If it had been a stranger walking in my office about that amount of money I would have told them to leave," she tells Euromoney. "But I had known this client for years. And they have the documents to support the claim."

Cam is no doubt a capable business litigator but is not qualified in New York, the state within which the US case has been brought; she says larger law firms were considered but "they couldn't do the work in time." Among the documents linked to the New York complaint are a motion for admission for Cam herself to be able to represent there. 

But in the plaintiffs' favour is a document purportedly from then Deutsche CFO Marcus Schenck, dated March 24 2017, to Lee Kwang-Goo, then chief executive and president of Woori Bank, confirming the €5 billion transfer to AJ Energy. This letter, appended with a copy of the MT199 message confirming the trade, concludes: "Please release the funds to AJ Energy LLC immediately to avoid legal action." It is stamped Deutsche Bank Frankfurt and is signed both by Schenck and by chief risk officer Stuart Lewis. Schenck has recently chosen to leave Deutsche Bank as part of its senior management changes.

The whole case, if it ever gets to court, will rest on this.

Euromoney has approached Deutsche about the case several times since first hearing about it in the Korean courts in January, and Deutsche has always declined to comment, which is to be expected: these are continuing cases and Deutsche is neither the plaintiff nor the defendant, nor accused of any wrong doing.

But Euromoney has also asked about this specific document. Although the veracity of the document is clearly in question, Deutsche has declined the opportunity to comment upon it.

Woori itself has responded in a filing to the US SEC, in which it says: "The alleged transferring bank has confirmed that there was no such transfer, Woori Bank and Woori America Bank have no record of receiving such funds, and Woori Bank believes that evidence of the transfer provided by AJ Energy, such as Swift messages, may have been forged.

"Woori expects to obtain a favorable outcome in this case and does not expect the matter have [sic] a material adverse effect on its financial condition."

The plaintiffs and attorney Cam explain the strange appearance of the whole thing in the context of Korean politics. The complaint explicitly describes Lee as "the instigator", and says that the plaintiffs made the second transfer after the expected departure of Lee after the expiry of his contract; it says that after speaking with Korea's Ministry of Strategy and Finance it was sufficiently confident in recovering the original funds to make the second transfer. 

"We have been steadfast in our struggle for justice and reclaim our stolen funds, but have met an imposing wall of subterfuge and corruption orchestrated by a cabal of like-minded government officials, banks, power brokers etc protecting and enabling Lee Kwang-gu [sic] and Woori Bank," says someone close to the plaintiffs in a written account of their side of the story provided to Euromoney in January. 

"The cabel [sic] led by Lee is deeply entrenched in the Korean power structure," it continues. In this account the impeachment of president Park Geun-hye and replacement by president Moon Jae-in should have worked in their favour, "because it signaled a return to rule of law and normalcy… we have been bitterly disappointed."  

Attorney Cam expects to be sworn in in New York within the next two weeks; watch this space.