The ruling party of South Korea is planning to promote the "Samsung Electronics, SK Hynix Leveraged ETF Loss National Compensation" and demand accountability from the government.

July 28th. South Korean People Power Party (People Power) member, Representative Jin Eun-hui, is researching whether investors who incurred losses after investing in a single-stock leverage ETF for Samsung Electronics and SK Hynix can file a state compensation lawsuit against the government. Representative Jin Eun-hui's office has recently started collecting relevant investors' opinions, investigating the scale of losses, and considering promoting accountability and investor relief through the National Assembly's Government Administration Committee. The controversy lies in whether the Financial Services Commission of Korea adequately assessed the risks before the launch of the single-stock leverage ETF and established sufficient investor protection mechanisms.

In April of this year, the Financial Services Commission of Korea amended relevant Capital Market Act regulations to allow the launch of leverage ETF products that track the daily price fluctuations of Samsung Electronics and SK Hynix at twice the rate, starting from May 27th. After the products were listed, funds quickly flowed in, and the mechanical rebalancing mechanism was believed to potentially amplify market volatility, leading to discussions on "Short Gamma" risk.

As of June 25th, the net asset value of the 14 related leverage ETFs reached 16.28 trillion South Korean won, and the daily trading volume once rose to 14.48 trillion South Korean won. Subsequently, on July 16th, the Financial Services Commission of Korea announced enhanced regulatory measures, increasing the basic margin requirements for investors buying related products from 10 million won to 30 million won and advancing the implementation to start from July 31st.

The People Power Party believes that the regulatory authorities made significant rule adjustments just one and a half months after the product launch, reflecting inadequate risk management and investor protection measures previously. Therefore, they plan to investigate the approval and risk assessment processes between the Financial Services Commission, the Financial Supervisory Service, and the Korea Exchange. However, the Financial Services Commission of Korea responded that the relevant system went through 40 days of legislative notice, impact assessment, and legal review and that the product launch time was also publicly explained in advance.

If the case eventually proceeds to a state compensation lawsuit, the core dispute will focus on whether the financial regulatory agencies engaged in any illegal activities and whether there is a direct causal relationship between policy decisions and investor losses.