24-Year-Old South Korean University Student Loses All Capital in Leverage Trading
24-year-old South Korean university student Lee Seung-ho used a trading app to apply 5x leverage on his 20 million KRW saved from military service, increasing it to nearly 300 million KRW. However, during market fluctuations in May, he faced forced liquidation, and all gains evaporated within 4 weeks, ultimately causing his account to fall below the initial investment.
Lee aimed to buy a house in Seoul and viewed leverage trading as a way to accelerate wealth accumulation amid high housing prices. The balance of margin loans in South Korea reached a record 38.63 trillion KRW in June, with investor debt exceeding 60 trillion KRW.
The South Korean regulator has suspended the listing of new single-stock leveraged ETFs, with Exness strategists pointing out this is a correction of hastily approved products, as leverage amplifies losses much faster than profits during volatility.
Source: Public Information
ABAB AI Insight
The younger generation in South Korea has previously flocked to leveraged stock markets under high housing prices and low salary conditions, similar to the cryptocurrency and stock speculation waves after the 2010s, which have amplified wealth disparities during bull markets but also created numerous cases of retail investors facing liquidation.
In terms of capital pathways, brokerages and leverage platforms attract youth funds through high-margin products, motivated by collecting interest and fees while catering to asset-chasing demands, but regulators tighten restrictions on product supply afterward.
Similar to the losses experienced by young investors in Japan after the leveraged real estate bubble in the 1980s, and the recent fragile performance of global retail leverage during volatility, South Korea is currently in a phase where high-leverage speculation driven by youth wealth anxiety coexists with regulatory corrections.
Essentially, this is about capital concentration: high leverage attracts retail funds to push up valuations during bull markets, but rapid liquidation during volatility leads to a transfer of wealth to platforms and institutions. The mechanism distorts risk preferences due to structural housing price pressures, accelerating the shift of regulation from leniency to restrictions, which long-term suppresses the scale of retail leverage.
ABAB News · Law of Cognition
Leverage amplifies wealth, but also the speed of going to zero.
The higher the housing price barrier, the stronger the leverage gambling.
Regulatory corrections always come after the bubble.