Qoo10 founder hit with travel ban despite pledge to resolve crisis

Industry

Published: 29 Jul. 2024, 13:38 Updated: 29 Jul. 2024, 19:23

Qoo10 founder hit with travel ban despite pledge to resolve crisis

Qoo10 founder and CEO Ku Young-bae [TMON]

The Justice Ministry imposed an overseas travel ban on Ku Young-bae, founder and CEO of Qoo10, on Monday afternoon despite his statement released on the same day pledging to resolve the current liquidity crisis at WeMakePrice and TMON by selling his stake in Qoo10 or using it as collateral.

Ku's official statement on Monday comes a week after the difficulties of sellers being paid by the two platforms came to the fore.

Sellers that listed their items on the e-commercial platforms asked for a fundamental solution to the delayed payouts, claiming that they too are the victims of the latest crisis just like the customers.

Qoo10 is a Singapore-based e-commerce company that operates both WeMakePrice and TMON, which are currently experiencing a massive cash crunch.

“To back up [the refund plans], Qoo10 is currently trying to secure liquidity to financially support [TMON and WeMakePrice] so both companies can recover from the damages,” said Ku in a statement released Monday.

“I will be selling all my shares in Qoo10, which account for most of my wealth, or use them as collateral to help sort out the situation.”

Ku also said he is considering offloading Qoo10's assets and stakes to secure cash for the two struggling e-commerce platforms. He estimated that customers suffered 50 billion won ($36 million) in damages centered on expensive travel packages while adding that amount of the damages for sellers was difficult to estimate.

“If the current situation is sorted, Qoo10 will also undergo a business structure modification and innovate its management systems,” the statement said. Measures planned include merging subsidiary companies and allowing partnered businesses to have voices in the company’s management.

“I faced a lot of difficulties and overcame many hardships while in danger of going bankrupt. I will not give up on the current situation and I hope to gain another chance to try again.”

Sellers and businesses affected by TMON and WeMakePrice held a press conference with a nonprofit, the People's Solidarity for Participatory Democracy (PSPD), at the organization's headquarters in central Seoul on Monday, calling the propsals by Ku, Qoo10 and the government inadequate.

"There are a small number of consumers who received refunds, but there seems to be no solution to resolve the damage suffered by the stores listed on [TMON and WeMakePrice]," the manager of the Center for Economic and Financial Justice at the PSPD said at the press conference.

"While the amount TMON owes us may look negligible, the damages for small businesses are critical," the chairperson for the Korea Federation of Small and Medium Businesses, Bang Ki-hong, said.

"TMON and WeMakePrice pay the sellers 70 days after the transaction is completed [...] and we currently have 100 days' worth of transactions that TMON hasn't paid," he said, insisting that lawmakers should force e-commerce platforms to pay the sellers within three days of the transaction.

A business owner who wished to remain anonymous told reporters that his business suffered even more due to TMON's aggressive promotions in the last two months.

"TMON helped us promote to reach 150 million won in revenue in the last two months, when our average revenue from the site was only 10 million won per month. Now we can't receive the two months' worth of payment and we don't even have any products to sell anymore," the owner said.

Business owners at the press conference also criticized the government's recently announced plan to provide low-interest loans to affected merchants, claiming that loans "only add to the burden when most sellers have existing debts to pay off," and instead hoped for Qoo10 to take responsibility and provide a financial solution.

TMON and WeMakePrice consumers took Ku to court for fraud, embezzlement and breach of trust on Monday.

“It is basically a Ponzi scheme when you operate an e-commerce business without the ability to pay the sellers,” lawyer Shim Jun-seop of Law Firm Sim told the press after he reported Ku and Qoo10's top management to the police in Gangnam District, southern Seoul.

The lawyer added that he himself is a customer affected by TMON and WeMakePrice.

The Seoul Central District Prosecutors' Office is also going through an internal legal review of TMON and WeMakePrice, according to Yonhap on Monday.

Update, July 29: Added response from business owners and consumers, changed headline to reflect addition.

Update, July 29: Added comments by the lawyer, moves by the prosecution and police.

Update, July 29: Added imposition of travel ban on Qoo10 CEO.

BY CHO YONG-JUN [cho.yongjun1@joongang.co.kr]