[Exclusive] Seoul Virtual Real Estate 'Second Seoul'... Over 10 Billion KRW Pre-Allocation Among Employees Before Launch

Second Seoul Service Ends After Two Days
Company CEO and Some Executives Involved in Misconduct
Pre-Launch 10 Billion KRW Profit Sharing

NBT Stock Soars 85%
All Shares Sold in Block Deal
Launch Forced Without Parent Company Consent
Suspected Stock Price Manipulation for High-Price Sale

NBT "Unilateral Launch by Mr. Kwak and Others
Will Relaunch After Service Improvements"

Image of 'Second Seoul,' a Seoul virtual real estate metaverse platform developed by NCT Marketing, a subsidiary of NBT.

[Asia Economy Reporter Donghyun Choi] The virtual real estate metaverse platform ‘Second Seoul,’ which gained attention last year amid a metaverse (extended virtual world) investment frenzy but was shut down just two days after its launch, has been embroiled in a ‘mukjwi’ (scam) incident involving some executives. It has been confirmed that Mr. Kwak, co-founder of the KOSDAQ-listed company NBT and CEO of its subsidiary NCT Marketing who led the development of Second Seoul, pre-allocated virtual real estate tiles worth approximately 10 billion KRW to insiders before the platform’s launch. More than half of the pre-allocated amount was taken by Kwak’s close associates who barely participated in the development of Second Seoul.

Former CEO Kwak Pre-Allocated 14% of Virtual Real Estate to Insider Executives Before ‘Second Seoul’ Launch

Second Seoul is a virtual real estate tile trading service independently developed by NCT Marketing, a wholly owned subsidiary of NBT. The entire city of Seoul was divided into 6.94 million non-fungible tokens (NFTs) representing virtual real estate tiles, allowing tile purchasers to earn investment, rental, and advertising income through the virtual properties. Second Seoul, which attracted high expectations with 250,000 pre-registered users in less than a month, launched on December 29 last year. However, the next day on the 30th, the service went into maintenance due to a surge in users and was abruptly terminated thereafter. At the time, the company only stated that "server stability would be improved and the service would reopen later."

According to audit documents of NCT Marketing exclusively obtained by Asia Economy on the 25th, the launch and sudden termination of Second Seoul were due to misconduct by the company’s CEO and some executives. In particular, it was confirmed that virtual real estate tiles worth a total of 9.716 billion KRW were pre-allocated to six NCT Marketing employees and six external developers of Second Seoul. Considering that the face value per tile was 10,000 KRW at launch, this corresponds to 14% of the total virtual real estate (approximately 69.4 billion KRW).

The pre-allocated virtual real estate tiles were traded among general users for several hundred million KRW after the service opened. Some even applied for currency exchange to cash out. An NBT official involved in the subsidiary audit explained, "At the time, the service had no operational control measures against payment security issues or wash trading, and none of the financial law violation risks were resolved," adding, "Former CEO Kwak launched the service without authorization." NBT announced that it has filed a complaint against Kwak and his associates.

NBT Stock Price Surges 85% in Two Months... Kwak Sells Entire Stake Worth 12.8 Billion KRW

When news of the Second Seoul launch spread in November last year, the parent company NBT’s stock price began to soar. On November 1 last year, NBT’s stock price was 18,150 KRW, rising to 33,600 KRW by the close of trading on January 3 this year. This represents an 85% increase over two months.

Coincidentally, Kwak disposed of all his NBT shares, which had been locked under a one-year mandatory lock-up period during the company’s listing process, through a block deal amid the volatile stock price caused by the Second Seoul issue. When NBT was listed on KOSDAQ on January 21 last year, Kwak’s reported stake was 591,400 shares (7.11%). He sold this stake on January 21 this year, the day the lock-up expired, for about 12.8 billion KRW. This has led to interpretations that the reason Kwak pushed ahead with the unauthorized launch of Second Seoul was to inflate the stock price and sell his holdings at a high price.

NBT: "Incident Caused by Deviations of Kwak and Some Others... Will Improve and Relaunch Second Seoul"

In August last year, when the development of Second Seoul was somewhat completed, Kwak requested NBT to review the service’s strategic direction. During the review, NBT identified issues such as potential violations of the ‘Act on Reporting and Using Specified Financial Transaction Information (Special Financial Transactions Act)’ and the ‘Electronic Financial Transactions Act,’ since the virtual real estate sales proceeds were held by the company as deposits and then paid out to users as a ‘payment model.’ NBT also demanded a full re-examination of the business, emphasizing the need for a long-term visionary business model beyond mere speculative purposes.

During this process, Kwak agreed to transfer the Second Seoul business to NBT and cooperate in building a more concrete revenue model. However, NBT claims that Kwak ignored this agreement and unilaterally launched the Second Seoul service.

Park Su-geun, CEO of NBT, said, "The valuable efforts of the majority of NBT members who have been dedicated to their roles and the company’s growth should not be diminished by personal deviations unrelated to actual corporate value," adding, "We will form a professional task force (TF) to develop and proudly relaunch Second Seoul as a legitimate business service."

Image of the 'Second Seoul' mobile application.

[Rebuttal Report] Regarding Allegations of Misconduct by Executives of Seoul Virtual Real Estate ‘Second Seoul’

Our newspaper previously reported on March 25 and April 4 under titles such as "NBT Subsidiary NCT Marketing Files Criminal Complaint Against Former CEO Kwak and Seven Others Involved in Developing ‘Second Seoul’," revealing misconduct by former CEO Kwak and executives of NCT Marketing, the developer of the virtual real estate metaverse platform ‘Second Seoul.’

In response, former CEO Kwak’s side stated, "The allegations of breach of duty by the CEO and employees of NCT Marketing are currently under investigation as of April and have not been proven true. The date when Kwak disposed of shares, January 25, 2022, was about one month after NBT suspended the ‘Second Seoul’ service and dismissed Kwak on December 29, 2021, and the disposal price was only 21,613 KRW," they informed us.

This report is pursuant to mediation by the Press Arbitration Commission.