Lumen Group Now Oversees 16 Affiliates After Over 6 Years
"Mini Timed Sale... Is It to Rescue Failing Affiliates?"
FSS Begins On-Site Inspections of Related Companies from the 6th
Lumen Payments, an electronic payment gateway (PG) company registered with the Financial Services Commission, has effectively fallen into a state of 'payment insolvency,' amid allegations that the Lumen Group misappropriated funds to support its struggling affiliates. As Lumen Payments has been identified as the main culprit behind a 60 billion KRW-scale delayed repayment incident involving peer-to-peer (P2P) loans in the online investment-linked finance industry (OnTu industry), financial authorities have opened all possibilities, including fund misappropriation, and have begun inspecting related companies.
According to the Financial Supervisory Service on the 8th, the total capital of Pureun Housing Comprehensive Construction, an affiliate of the Lumen Group, was minus 1.38142 billion KRW as of the end of last year, indicating a state of complete capital erosion. Complete capital erosion means the total capital is negative. Last year's net loss was recorded at 3.07943 billion KRW, marking a transition to a deficit. The Lumen Group acquired Pureun Housing Comprehensive Construction last year to expand its real estate and construction business.
The auditor of Pureun Housing Comprehensive Construction also noted the presence of "significant uncertainties related to the going concern." In last year's audit report, it stated, "If housing sales do not proceed smoothly next year and interest payments on borrowings become difficult, although the major shareholder and manager is currently paying interest on borrowings for the going concern, there exist significant uncertainties that raise substantial doubt about the company's ability to continue as a going concern."
Another affiliate of the Lumen Group, Lumen Financial, established in 2018 as a card payment terminal manufacturer, was rated 'CCC' by NICE Credit Information as of the 1st. A CCC rating indicates below-average creditworthiness for commerce and warns of expected deterioration in transaction stability, requiring caution. OnOff Platform, an advertising agency affiliated with the Lumen Group established in 2020, had a debt ratio of 1316% as of 2021, according to NICE Credit Information. Kim Inhwan, CEO of the Lumen Group, also holds CEO positions at Lumen Financial and OnOff Platform alongside Lumen Payments.
The parent company of these firms, Lumen Group, has been evaluated as having an ambiguous existence. Although the Lumen Group introduces itself as managing 16 affiliates on its website, many of the affiliates' executives are the same individuals centered around CEO Kim. Some financial and investment-related subsidiaries are not even registered as corporations, making their existence unverifiable. Following the payment insolvency incident of Lumen Payments, the Lumen Group shut down its website the previous morning.
Consequently, suspicions have arisen that the Lumen Group misappropriated settlement funds from the PG company Lumen Payments to 'save affiliates.' After establishing Lumen Financial in 2018, CEO Kim is known to have created a group company operating various businesses such as finance, construction, dining, and information technology (IT) through new business launches and mergers and acquisitions (M&A) over six years. There is suspicion that in the process of aggressively expanding, even PG company funds were used. Since there is currently no way to prevent a PG company from using settlement funds for purposes other than intended, these suspicions are gaining traction.
The bigger problem is that repayment delays have occurred in the pre-settlement loan products related to the OnTu industry connected to Lumen Payments. Due to the repayment delays, P2P investors face the possibility of losses totaling 60 billion KRW. This product is structured to invest in sales receivables (settlement receivables) of small business owners such as self-employed individuals through factoring companies (pre-settlement companies). The PG company Lumen Payments settles sales proceeds to the pre-settlement company, which then pays the corresponding amount to OnTu industry investors.
Kwack Kiwoong, CEO of Cross Finance, an OnTu company operating the investment product, described the incident as a "mini Tmon and Wemakeprice incident" and claimed the possibility of misappropriation of settlement funds by Lumen Group affiliates. Cross Finance announced plans to file a criminal complaint against Lumen Payments and CEO Kim the previous day. An OnTu industry investor, Mr. A, said, "Lumen Group has expanded unrelated and completely different businesses indiscriminately, and it may not be simple business expansion but possibly a paper company," adding, "The plan to enter the Vietnamese market raises suspicions of money laundering or overseas escape."
The Financial Supervisory Service plans to investigate the incident with all possibilities open, including the scale of damage, fund misappropriation, and risk expansion. Since the 6th, personnel responsible for PG companies and the OnTu industry have been conducting on-site inspections. A Financial Supervisory Service official said, "If there are violations, we will thoroughly address them."
CEO Kim stated regarding the Lumen Payments payment insolvency incident, "There were issues with the Wemakeprice case, and the company is struggling due to a lack of operating funds."
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