Korea Court Rules Bond Chat on Telegram Doesn’t Count as a Deal

(Bloomberg) --

South Korean bond traders are learning an important lesson in the social media era: don’t always trust private messaging apps when doing deals.

Seoul Central District Court said in a ruling that a conversation about a debt deal via Telegram messenger doesn’t really count as a definitive contract. That’s a defeat for Yuanta Securities Korea Co., which filed a lawsuit in 2018 claiming that Hyundai Motor Securities Co. didn’t honor a debt deal made during a conversation on Telegram.

Yuanta had said Hyundai Motor Securities owes it 14.8 billion won ($12.7 million) after having agreed to buy won-denominated commercial paper repackaging dollar bonds sold by China Energy Reserve & Chemicals Group Co., one of the biggest Chinese defaulters. HMS said no deal was made because there was no definitive agreement to buy the paper.

The decision comes as regulators abroad also clamp down on the financial industry’s use of private messaging apps. A credit trader at JPMorgan Chase & Co. was recently placed on leave over the use of WhatsApp, the latest such case to hit Wall Street. It’s also a reminder of the risks of investing in some Chinese industrial debt after Korean investors were burned by CERCG’s offshore bond default in 2018.

The Seoul court said last week that a Telegram conversation can’t be considered a binding contract because secret chats on it don’t leave a trace on its servers and conversations can be removed or automatically deleted, according to the ruling seen by Bloomberg News.

To contact the reporter on this story: Kyungji Cho in Seoul at kcho54@bloomberg.net

To contact the editors responsible for this story: Andrew Monahan at amonahan@bloomberg.net, Ken McCallum, Finbarr Flynn

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