Kwon Nam-hee and Merge Plus Corporation Ordered to Pay Over 200 Million Won
Online Shopping Mall Companies Not Held Liable for Compensation
Some Merge Point victims who suffered losses from the 'large-scale refund crisis' won a lawsuit in the first trial, claiming damages against Merge Plus and its CEO. However, the liability of online shopping mall companies that mediated Merge Point transactions was not recognized.
On August 13, 2021, subscribers demanding refunds gathered at the headquarters of the payment platform company 'Merge Point' located in Yeongdeungpo-gu, Seoul. [Image source=Yonhap News]
On the morning of the 1st, the Civil Division 22 of the Seoul Central District Court (Presiding Judge Choi Wook-jin) ruled in the first trial of a damages claim lawsuit worth about 225 million KRW filed by about 140 victims of the Merge Point incident against Merge Plus and others, stating that "Merge Plus, Merge Supporter, and CEO Kwon Nam-hee of Merge Plus must jointly pay 225,113,050 KRW and related delayed interest." On the other hand, the claims for damages against e-commerce companies such as Lotte Shopping, 11st, eBay Korea, Style C Corporation, Wemakeprice, and TMON were dismissed.
Previously, the victims filed a lawsuit in September 2021 demanding about 226.8 million KRW in compensation for unused Merge Point balances, purchases of Merge Plus services, and consolation money for mental damages. The victims also held the e-commerce companies responsible, arguing that they suffered losses due to the fault of e-commerce companies that sold gift certificates and subscription service vouchers without properly verifying the business structure of Merge Plus, which lacked repayment ability.
On the other hand, the e-commerce companies denied responsibility. They claimed that as sales intermediaries, they were not liable for damages that the seller should bear, and that the contracted company was not Merge Plus but the company (Consa) that issued brand gift certificates for marts and convenience stores.
Merge Point is a payment service launched in 2017, boasting 'unlimited 20% discount.' It grew to 1 million users and a monthly transaction volume of 30 to 40 billion KRW, but in August 2021, it suddenly announced the suspension of point sales and reduction of usage locations, triggering a flood of refund requests from users. Hundreds of subscribers demanding refunds gathered at the Merge Plus headquarters in Yeongdeungpo-gu, Seoul.
Subsequently, CEO Kwon and his sibling were arrested and indicted on charges including fraud and violation of the Electronic Financial Transactions Act. The prosecution pointed out that despite accumulating deficits from May 2020 to August 2021 and facing a business suspension crisis, the Kwon siblings sold prepaid recharge money called Merge Money worth 252.1 billion KRW to 570,000 consumers. The prosecution estimated the actual damage amount for Merge Money purchasers at 75.1 billion KRW and the damage to Merge Point affiliates at 25.3 billion KRW.
CEO Kwon and Chief Strategy Officer (CSO) Kwon Bo-gun were sentenced to four and eight years in prison respectively in the criminal trial appeal in June, the same as in the first trial. Additionally, the court ordered CSO Kwon to pay a fine of 5.3 billion KRW and imposed a fine of 10 million KRW on the Merge Plus corporation. At that time, the court stated, "The business of Merge Plus itself appears to be based on a deficit structure," and "It was judged that the profit model anticipated by the defendants was unlikely to be realized."
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