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Outrage follows parole of e-commerce CEO behind $71.5 million in damages

Published: 02 May. 2025, 20:18

Kwon Nam-hee, CEO of Mergeplus, appears at the Seoul Southern District Court in Yangcheon District, western Seoul, in December 2021 for a warrant review. [NEWS1]

Kwon Nam-hee, CEO of Mergeplus — the company behind the prepaid discount service Mergepoint, which caused an estimated 100 billion won ($71.5 million) in damages after suspending large-scale refunds — was granted parole on Friday.

Victims of the Mergepoint scandal expressed outrage, saying that the perpetrator is free when there has been no compensation for her actions. Kwon was deemed eligible during a special parole review held last month in celebration of Buddha’s Birthday, according to legal sources.

Kwon and her younger brother, Kwon Bo-gun, chief strategy officer (CSO), were indicted for selling roughly 251.9 billion won worth of prepaid credit called "Merge Money" to 568,000 users between May 2020 and August 2021, despite the company teetering on the brink of collapse due to mounting losses.

In October 2023, the Supreme Court upheld lower court rulings sentencing Kwon to four years in prison and her brother to eight years, along with an order to forfeit 5.3 billion won.

Parole is granted to inmates who have served at least one-third of their sentence and meet conditions such as good behavior, following review by a parole committee. Kwon appears to have met those conditions, leading to her release.

Customers fill the headquarters of Mergeplus on Friday afternoon in Yeongdeungpo, western Seoul, demanding refunds after the company reduced the number of affiliated shops and stopped selling Mergemoney on Aug. 11, 2021. [YONHAP]

However, victims are pushing back.

“The prosecution estimated 75.1 billion won in damages to Merge Money buyers and 25.3 billion won in losses to affiliated merchants, totaling over 100 billion won,” said a representative who has led class action lawsuits, surnamed Cho. “Consumers haven’t even received proper refunds, yet the perpetrator is walking free.”

In an open group chat for Mergepoint victims, furious reactions poured in, including: “This country is only lenient toward scammers,” and “This goes against the public sense of justice.” Some victims said they planned to submit civil petitions via the Anti-Corruption and Civil Rights Commission’s website, demanding the cancellation of Kwon’s parole.

Nearly four years have passed since the Mergepoint scandal broke, yet victims still have little hope of retrieving their prepaid funds. In July last year, the Seoul Central District Court ruled in favor of 300 plaintiffs seeking damages from Mergeplus, ordering the Kwon siblings and the company to each pay several hundred thousand won to up to 10 million won to affected users.

The Mergepoint company logo in Yeongdeungpo, western Seoul, on Aug. 18. [YONHAP]

However, the Kwons are believed to have squandered much of their assets, making repayment difficult.

Victims are now saying that e-commerce intermediaries with greater financial capacity, such as TMON and WeMakePrice, should also bear joint responsibility, as they aggressively promoted and sold what turned out to be unstable voucher products.

In June 2022, the Korea Consumer Agency accepted the claims of 5,467 victims who filed for group dispute mediation and ruled that online intermediaries should also pay damages. However, the decision had no binding force. In the first civil ruling, TMON and WeMakePrice were not held liable.

Customers are lined up outside the headquarters of Mergeplus on the afternoon of Aug. 13, 2021, in Yeongdeungpo, western Seoul, demanding refunds after the company reduced the number of affiliated shops and stopped selling Mergemoney on Aug. 11, 2021. [NEWS1]

Experts agree that as structural shifts in the e-commerce market accelerate, the next administration must overhaul related laws.

“The gap between the law and reality is too wide in the online platform market, especially in basic statutes like the Electronic Commerce Act,” said attorney Byun Woong-jae, former head of the Korea Consumer Agency’s dispute mediation committee. “A full revision is needed.”

Byun added that “in-depth research across public and private sectors should identify qualification requirements and liabilities by platform” and that “platforms must be required to provide transparent, extensive information on sellers to buyers.”

“Cases where undercapitalized online businesses raise large amounts in prepaid funds and then go bankrupt without sufficient legal consequences have effectively become a kind of fraud mechanism,” said Hyun Jung-hwan, professor of international commerce at Dongguk University. “In countries like Britain, consumers’ prepaid funds are kept fully segregated through deposit protection agencies.”

Hyun stressed the need to revise the Electronic Financial Transactions Act so that e-commerce companies cannot use prepaid funds as operational capital.

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.
BY LEE SU-MIN [[email protected]]