Prosecutors raid TMON, WeMakePrice and Qoo10 CEO's home over financial scandal

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Prosecutors raid TMON, WeMakePrice and Qoo10 CEO's home over financial scandal

Published: 01 Aug. 2024, 12:28 Updated: 01 Aug. 2024, 15:51

LEE SOO-JUNG
lee.soojung1@joongang.co.kr

Investigative officers from the Seoul Central District Prosecutors’ Office head to Qoo10 office in Gangnam District, southern Seoul on Thursday morning for the search and seizure raid. The headquarters of its subsidiary e-commerce marketplaces, TMON and WeMakePrice, were also raided on the same day. [YONHAP]

Prosecutors on Thursday morning raided the headquarters of TMON and WeMakePrice, as well as the residence of Ku Young-bae, founder and CEO of Qoo10, the parent company of the two e-commerce platforms.

An investigation team from the Seoul Central District Prosecutors’ Office searched the residences of three executives from Qoo10, TMON and WeMakePrice, along with seven related offices. They seized accounting documents and digital devices.

This search and seizure operation follows the establishment of a dedicated investigation unit on Monday to address a liquidity crisis involving these companies.

In addition to Ku’s residence, the homes of TMON CEO Ryu Gwang-jin and WeMakePrice CEO Ryu Hwa-hyeon were also searched.

The prosecution has accused Ku of fraud, embezzlement and breach of trust.

TMON and WeMakePrice are suspected of maintaining contracts with sellers and providing marketplaces while concealing their severe financial issues and a potential crisis in seller payouts.

The Korean government estimates that overdue payments from the two marketplaces could total 210 billion won ($153 million) as of May. According to a Yonhap News Agency report on Wednesday, the total damage could reach 1 trillion won, considering future unpaid settlements.

The prosecutors also received a warrant to trace the records of the executives’ bank accounts and related companies. They are expected to look into allegations that the executives misused funds paid by consumers or that should have been refunded for unlawful purposes to expand their businesses.

In the warrant, the prosecutors purportedly specified that the suspects are under suspicion of embezzling some 40 billion won, according to a report from Yonhap News Agency on Thursday.

It was also reported that law enforcement wrote that Ku is a suspect of financial fraud amounting to 1 trillion won in the search and seizure warrant against him.

On Friday, the prosecution began a preliminary investigation and sought travel restrictions on key suspects involved in the liquidity crisis, following a request from the Financial Supervisory Service.

On Monday, the Justice Ministry imposed a travel ban on Ku and three other suspects.

After TMON and WeMakePrice filed for receivership with the Seoul Bankruptcy Court on Monday, the prosecution launched a full-scale investigation due to the companies’ failure to address the seller-payout crisis.

Prosecutors will trace the internal cash flow to determine how consumer funds were spent and the current status of these funds based on the seized documents. They will also summon Ku and other executives for further questioning.

Update, August 1: Added details about warrants.

BY LEE SOO-JUNG [lee.soojung1@joongang.co.kr]