The Justice Ministry banned Qoo10 CEO Ku Young-bae from leaving the country on Monday as part of criminal investigations into Ku and the chief executives of its local subsidiaries. The probes were prompted by a complaint filed by affected consumers on the same day, accusing them of fraud, embezzlement and breach of trust.
Since early July, Tmon and WeMakePrice have been delaying payments to sellers operating on their sites, leading businesses to cancel listings and withdraw, while consumers have flocked to the companies demanding refunds. Estimated damages exceed 100 billion won ($73 million).
The financial troubles are attributed to Ku’s reckless business expansion, including a plan to list his logistics unit Qxpress on Nasdaq. Ku is suspected of diverting funds from Tmon and WeMakePrice to improve the financial condition of Qxpress.
The Korean national founded Gmarket, a major Korean e-commerce platform, in 2003 and sold it to eBay in 2009. In 2010, he established Giosis in Singapore in partnership with eBay and launched Qoo10, focusing on the Southeast Asian markets.
Qoo10 has steadily expanded its operations, running online malls in Japan, Singapore, Indonesia, Malaysia, China and Hong Kong. In 2019, the e-commerce giant acquired the Indian online marketplace ShopClues and established the delivery company Qxpress.
In an ambitious acquisition spree over the past two years, Ku acquired four Korean e-commerce platforms: Tmon in September 2022, Interpark Commerce in March 2023, WeMakePrice in May 2023, and AK Mall in March 2024. Qoo10 also acquired Wish, a U.S.-based global shopping platform, in February 2024.
Both Tmon and WeMakePrice were in a state of capital erosion at the time of their acquisition. As of 2022, Tmon’s current liabilities totaled 7.1 trillion won ($518.9 million), exceeding its current assets of 1.309 trillion won by more than five times. As of 2023, WeMakePrice’s current liabilities amounted to 3.098 trillion won, also more than five times its current assets of 617 billion won.
Ku's ambitious acquisition strategy has exacerbated the liquidity problems, with funds from Tmon and WeMakePrice believed to have been siphoned off to finance the purchases and operations of his other subsidiaries.
The two platforms typically hold consumer payments for two to three months before settling with sellers, allowing Qoo10 to use the funds for other purposes.
Industry sources say Qoo10 has controlled the financial management of Tmon and WeMakePrice by absorbing related departments since the first half of 2023.
"Operating shopping malls despite being unable to pay settlements amounts to a Ponzi scheme," attorney Shim Jun-sup told reporters before submitting a complaint against Ku on Monday.
"The illegal misappropriation of funds to grow Qoo10's subsidiary Qxpress and the lax management of the companies may constitute a breach of trust or embezzlement," he said.
The Financial Supervisory Service has faced difficulties in imposing sanctions despite being aware of the e-commerce companies' transaction methods.
"Since most e-commerce companies are in startup mode, initial capital erosion is common," said Lee Se-hoon, the Deputy Head of the Financial Supervisory Service. He explained that it is difficult to uniformly apply regulatory standards and cancel registrations.
The Fair Trade Commission and the Financial Supervisory Service initiated a joint investigation last week into the extent of delayed payments and potential breaches of e-commerce regulations.
On Monday, Ku apologized to the public and said he would use his personal assets to address the payment crisis.
"I will sell or use as collateral the entirety of my Qoo10 shares, which constitute most of my assets, to address this situation," he said in a statement.
Later on Monday, Tmon and WeMakePrice filed for corporate rehabilitation procedures with a Seoul court. The court usually decides whether to accept a rehabilitation request within a week of filing.
reporter
Kim Joo-heon
jhkim123@ajunews.com
