‘There’s no money left’: Qoo10 CEO excoriated in parliamentary hearing

Industry

‘There’s no money left’: Qoo10 CEO excoriated in parliamentary hearing

Published: 30 Jul. 2024, 15:02 Updated: 30 Jul. 2024, 19:56

SHIN HA-NEE
shin.hanee@joongang.co.kr

Ku Young-bae, founder and CEO of Qoo10, bows his head to apologize for the ongoing liquidity crunch at online marketplaces TMON and WeMakePrice during a hearing at the National Assembly in western Seoul on Tuesday. [NEWS1]

Ku Young-bae, founder and CEO of troubled Qoo10, estimated the maximum amount of funds available within the company to be 80 billion won ($57.8 million) amid a massive cash crunch plaguing e-commerce platforms TMON and WeMakePrice.

Ku added, however, that whether the entirety of said assets can be used to resolve the ongoing payout delays is uncertain.

"The maximum amount of funding the company [Qoo10] can mobilize at this point is 80 billion won, but I'm not sure if we would be able to tap into it immediately," said Ku.

The comment came during a parliamentary hearing held by the National Policy Committee about the ongoing liquidity crisis at the Qoo10-owned online marketplaces.

The attendees of the hearing included Financial Supervisory Service (FSS) Gov. Lee Bok-hyun, Fair Trade Commission Chair Han Ki-jeong and chief executives of TMON and WeMakePrice.

Lawmakers from both sides of the political aisle strongly slammed not only Ku and the management of the two companies, but also financial regulators for the oversight.

President Yoon Suk Yeol weighed in on the incident during the day, urging financial authorities to "take thorough measures in accordance with the law."

Delayed payouts exceed 200 billion won and rising

During the hearing, TMON CEO Ryu Gwang-jin said that the company owes 138.4 billion won in delayed payments to 2,081 merchants so far. The amount, however, is expected to significantly increase when pending settlements reach their due dates. Payments to merchants are typically settled about 50 to 60 days after the transaction.

Speculation suggests the amount may reach up to 1 trillion won.

WeMakePrice CEO Ryu Hwa-hyeon said that the company owes 88 billion won to 659 sellers, which does not include transactions made in June and July.

The government estimated on Friday that the amount of delayed payouts owed to sellers stood at 213.4 billion won, with TMON responsible for 128 billion won and WeMakePrice 85.4 billion won.

Ku apologized to consumers and sellers affected by the payout delays and once again vowed to “offer everything I own,” including his personal assets, to address the cash crunch. The CEO holds a 38 percent stake in Qoo10, a Singapore-based e-commerce company.

Ku also admitted there is a possibility of liquidity crunches at other subsidiaries of Qoo10, namely Interpark Commerce and AK Mall.

Democratic Party Rep. Kim Nam-keun said during a hearing that “words from internal staff suggest that they are also having difficulties with the payout settlement,” to which Ku answered that “I believe that is a possibility.”

'Where did the money go?'

The key question repeated multiple times during the hearing was "Where did the money go?", to which Ku answered, "To my knowledge, there is no money [remaining from transactions] within the company."

"Most of the money was spent on marketing and promotions due to price competition," he said, adding that "deficits have been accumulating since the acquisition of TMON."

Ku and the chief executive of the imperiled e-commerce platforms also strongly denied allegations that TMON and WeMakePrice filed for court receivership in order to avoid paying the unsettled money owed to sellers by declaring insolvency.

The WeMakePrice CEO stressed that the intention of the filing is not to acquire a bailout, saying "I will do everything I can with my life on the line to normalize the company's operations."

As the two companies filed for receivership with the Seoul Bankruptcy Court on Monday, the court froze the assets and debts of the online marketplaces on Tuesday, effectively suspending all payouts to sellers.

Regarding the accusation that Qoo10 used the money owed to sellers for aggressive business expansion, namely the recent acquisition of the California-based e-commerce platform Wish, Ku acknowledged that the company used funds from TMON and WeMakePrice for the 25 million won deal, but stressed that "the money was repaid within a month."

However, the chief financial regulator said that Ku's response "cannot be trusted."

"Though we intend to approach the case based on good faith, the recent actions and comments [by Ku] are contradictory, so his words cannot be trusted," said the FSS governor.

Financial Supervisory Service Gov. Lee Bok-hyun speaks during a parliamentary hearing on the ongoing liquidity crisis at Qoo10-owned online marketplaces TMON and WeMakePrice held at the National Assembly in western Seoul on Tuesday. [NEWS1]

Responding to criticism by lawmakers against his agency, the FSS governor apologized for management failures during the hearing, saying that "we have made various requests [to Qoo10], including managing the unsettled payouts separately," but "such requests have not been executed properly."

The financial authorities are currently looking into where the unsettled money went, with about 20 investigators assigned to the task.

Prosecutor General Lee One-seok also ordered the establishment of a prosecutorial investigation team dedicated to Qoo10's collapse on Monday.

Yoon calls for strict measures

President Yoon also called for a thorough investigation into the crisis.

The president urged regulators to "take thorough measures in accordance with the law," according to the presidential spokesperson Tuesday.

Yoon said that "the biggest job the government has within a market economy is to strongly separate and sanction cheating behaviors," and demanded that the relevant government agencies bolster monitoring of any abnormal activities.

Updated, July 30: Changed headline, added details of the hearing, including comments and statements from the Financial Supervisory Service chief and the presidential office.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]