South Korea's Financial Supervisory Service chief Lee Chan-jin has admitted that regulators accelerated the review of single-stock leveraged ETFs in order to meet a predetermined launch schedule, becoming the third senior official to acknowledge fault for products that cost retail investors trillions of won. Testifying at the National Assembly's Political Affairs Committee audit on Monday, Lee confirmed that the FSS completed its work on the products before the Korea Exchange had finished its preliminary review — a sequencing he indicated appeared to be unprecedented.
The controversy centers on 16 leveraged ETFs linked to Samsung Electronics and SK Hynix that debuted on May 27, 2026. The funds were designed to deliver double the daily move of the underlying shares. The launch came just one week before South Korea's elections on June 3, prompting opposition lawmakers to repeatedly claim the timing was politically motivated. 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 as potentially responsible for the rushed approval.
Lee attributed the speed to the FSC's mid-April announcement of a listing schedule, saying regulators "moved quickly through the review" to keep up with the May 27 deadline. When asked by People Power Party lawmaker Park Dae-chul whether such reverse-order processing had ever occurred before, Lee said checks indicated it appeared to be the first time.
The fallout has been severe. A market note from Citi's Mohamed Apabhai, head of Asia-Pacific trading strategy, estimated Korean retail losses at roughly $38.7 billion, or 58 trillion won, by late July. While the FSC chairman dismissed a separate 54 trillion won figure as unofficial, the FSS's own data confirmed 2.3242 trillion won ($1.57 billion) in realized trading losses at 10 financial investment firms between May 27 and August 14. Regulators stopped new listings on July 16 and raised the minimum cash requirement for trading from 10 million won to 30 million won on July 31, after which trading volume dropped approximately 97% from its June peak.
The scandal has significant crypto implications. Korean traders have increasingly moved their money abroad to access leverage that domestic rules do not allow, using KORU-linked perpetual futures on Binance, Bybit, OKX, and KuCoin that can reach 150 times the Kospi's daily swing. Research from Tiger Research and Chainalysis estimated that 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, underscoring the capital flight driven partly by restrictive domestic leverage rules.
The Finance Ministry, the Financial Services Commission, 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 domestic investment — despite that being 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, meaning the National Assembly never voted on it.
