600 Billion KRW Repayment Delay at Cross Finance
"It Was Difficult with Wemepro"...Suspected Misappropriation of Settlement Funds
Financial Supervisory Service Opens All Possibilities and Conducts On-Site Inspection
As the Tmon and Wemakeprice unsettled payment crisis spreads to the financial sector, Lumen Payments, an electronic payment gateway (PG) company registered with the Financial Services Commission, has effectively fallen into a 'payment default' state. Lumen Payments is linked to advance payment loan investment products in the online investment-linked finance industry (OnTu industry), raising the possibility that peer-to-peer (P2P) investors could face losses amounting to 60 billion KRW. The Financial Supervisory Service has been conducting on-site inspections since the previous day to assess the situation.
According to financial sources on the 7th, a repayment delay of 60 billion KRW occurred in advance payment loan investment products maturing between the 2nd and 7th of the month from OnTu company Cross Finance. The problematic product is structured to invest in sales receivables (settlement payment claims) of small business owners and self-employed individuals through factoring companies (advance payment companies). The PG company Lumen Payments settles the sales proceeds to the advance payment company, which then pays the amount to the OnTu industry investors.
The settlement delay issue at Cross Finance began when Lumen Payments failed to repay the sales proceeds. Kim Inhwan, CEO of Lumen Payments, sent a message to Asia Economy the previous day stating, “There were issues related to the Wemakeprice case, and the company is experiencing difficulties due to a shortage of operating funds. We apologize for causing concern and plan to repay investors without fail.”
Gwak Kiwoong, CEO of Cross Finance, explained, “Lumen Payments has never defaulted in three years and is specialized in advance payment loan investment products. However, it is presumed that some sales receivables held by Lumen Payments defaulted due to their connection with the Tmon and Wemakeprice incident.”
Within the industry, suspicions have also been raised about Lumen Payments misappropriating settlement funds. Currently, there is no way to prevent a PG company from using settlement funds held during the settlement period for purposes other than intended. The obligation to separately manage settlement funds applies only to escrow services for payment deposits. Since Lumen Payments is registered only as a PG company, it is not legally required to segregate and manage settlement funds.
As the repayment of investment funds becomes uncertain, investors are sharing cases of damage and filing complaints with the Financial Supervisory Service. Investor A stated, “Including investments under my family’s name, about 150 million KRW is tied up. I suspect that Lumen Payments may have used the settlement funds to expand business, such as entering the Vietnamese market or acquiring a construction company.”
The Financial Supervisory Service plans to keep all possibilities open regarding the scale of damage, misappropriation of funds, and risk expansion while investigating the situation. According to related industry sources, personnel responsible for PG companies and the OnTu industry from the Financial Supervisory Service conducted on-site inspections the previous day.
Cross Finance started in March 2017 as an in-house venture of Koscom, a subsidiary of the Korea Exchange. In October 2021, it changed its name from Korea Bill Brokerage to Cross Finance Korea, and in August last year, it achieved a cumulative loan brokerage amount of 2.8 trillion KRW and 25,000 loan cases.
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