Prosecutors Conduct Third Raid on Timeff... Focus on Determining When Financial Crisis Was Recognized

The Third Search and Seizure Following 1-2 Days of Raids

The prosecution investigating the unsettled payment issue of sales proceeds from TMON and WEMAKEPRICE conducted a search and seizure operation again on the 5th, following the operations on the 1st and 2nd.

According to legal circles, the Anti-Corruption Investigation Division 1 of the Seoul Central District Prosecutors' Office (Chief Prosecutor Lee Joon-dong) carried out a third consecutive day of search and seizure on the 5th at three locations, including the offices of TMON, WEMAKEPRICE, and Qoo10 Technology. This was a continuation of securing materials following last week's search and seizure of 10 offices and residences.

The investigation team is simultaneously analyzing evidence secured during the search and seizure on the 1st and 2nd, as well as statements obtained from Lee Si-jun, Qoo10's Chief Financial Officer, on the 2nd, to investigate where this incident originated and when the management recognized the financial crisis. The prosecution has tentatively cited charges of fraud amounting to about 1 trillion won and embezzlement of 40 billion won in the search warrants.

On the 29th, as the 'unsettled payment issue' of Wemakeprice and Tmon continues, the Tmon building in Gangnam-gu, Seoul, is closed with its doors firmly locked. Photo by Jo Yongjun jun21@

Legal circles predict that the key point of the prosecution's investigation will be to determine when the parent company Qoo10 Group and the management of TMON and WEMAKEPRICE recognized the serious financial crisis. For fraud charges to be established, it must be proven that the accused knowingly deceived the other party into a transaction while being aware that they had no intention or ability to fulfill the obligations agreed upon at the time of the transaction.

There are numerous indications suggesting that TMON, WEMAKEPRICE, and Qoo10 were aware of the cash flow crunch in advance. Recently, TMON and WEMAKEPRICE sold prepaid recharge funds called 'TMON Cash' and various gift certificates at a significant discount using a pre-order and post-use method, raising suspicions that they engaged in excessive promotions.

WEMAKEPRICE stated on the 11th of last month that the delay in payment settlement was due to a "system problem," and Qoo10 also announced on the 17th of the same month that it was a "temporary computer system failure." This raises doubts that the companies extended their business lifespan by passing the 'hot potato' in a situation where the business was already facing a critical crisis.

Some argue that the current unsettled payment issue was foreseeable from the moment Qoo10 Group acquired TMON and WEMAKEPRICE, which were already in a state of capital erosion, and then focused on increasing transaction volume through aggressive promotional events. However, there is also a view that it is difficult to conclude there was fraudulent intent solely because platform operators often engage in aggressive marketing to create a 'lock-in effect' that retains consumers, even if they operated at a loss.

Koo Young-bae, CEO of Qoo10 Group, is speaking at the urgent inquiry on the 'Timon and Wemakeprice settlement and refund delay incident' held on the 30th at the National Assembly's Political Affairs Committee. Photo by Hyunmin Kim kimhyun81@

In this context, Qoo10 CEO Koo Young-bae's explanation during a National Assembly inquiry on the 30th of last month, stating, "This issue was not done with any fraud or intent but has been ongoing. It was a behavior accumulated over more than ten years," can be interpreted as a denial of intent. He also mentioned, "The competitive environment intensified, and we did engage in aggressive marketing," adding, "Most of the money was not misappropriated but spent mostly on promotions due to price competition..."

Since it is largely evident that TMON and WEMAKEPRICE used newly incoming sales proceeds to settle existing sales proceeds, the prosecution is expected to focus its investigative efforts on proving whether they recognized the possibility of business suspension and when that recognition occurred. Depending on the extent to which the prosecution can prove this, the amount involved in the fraud charges may increase or decrease from the current 1 trillion won. The prosecution has already summoned and investigated CFO Lee, known as the 'key man' who best understands the financial flow of TMON and WEMAKEPRICE, as the first among the major related parties.

The prosecution is also reported to have secured CFO Lee's mobile phone containing recorded call files from the past two years. Additionally, the prosecution plans to review the seller terms of use of TMON and WEMAKEPRICE, as well as statements from related parties, to determine whether these companies had the authority to operate sales proceeds excluding commissions.