BioN Ryu Jin-hyung CEO Accused of Embezzlement and Breach of Trust Involving 6 Billion Won

"Major Shareholder CTM Inflated Subsidiary's Value and Transferred It to Baion"
"Used Company Funds for Acquisition... Resulting in Losses for Baion and Its Shareholders"

Ryu Jin-hyung, CEO of the KOSDAQ-listed company Baion, has been confirmed to be accused of embezzlement and breach of trust involving approximately 6 billion KRW. The suspicion is that the company’s value was inflated when acquiring shares of Gwangjin Sanjeon, a subsidiary of the largest shareholder CTM, in early last year.

According to the financial investment industry on the 19th, former Baion inside director Seo Dong-il filed a complaint with the Seoul Southern District Prosecutors' Office, accusing Baion CEO Ryu Jin-hyung of embezzlement and breach of trust in the course of business.

According to the complaint, former director Seo claimed that CTM, Baion’s largest shareholder, inflated the value of its subsidiary Gwangjin Sanjeon and sold it to Baion in order to repay a 7 billion KRW loan raised when acquiring Baion’s shares and management rights.

CTM signed a contract on November 13, 2023, to acquire Baion’s shares and management rights for 11.3 billion KRW. Of the acquisition funds, 7 billion KRW was raised through borrowing. After the acquisition contract was completed, Ryu, a former executive director of CTM, was appointed as CEO of Baion at an extraordinary shareholders' meeting in January last year.

CTM, which took control of Baion’s management rights, transferred 28% of its subsidiary Gwangjin Sanjeon’s shares to Baion for 6.02 billion KRW on March 7 last year. Gwangjin Sanjeon was a company in which CTM held 70% and former CTM CEO Jeon Byung-cheol held 30% of the shares.

At that time, Baion evaluated the corporate value using estimated future earnings of Gwangjin Sanjeon. The evaluated corporate value was 21.4 billion KRW. Gwangjin Sanjeon recorded pre-tax operating profits of about 1.1 to 1.4 billion KRW from 2021 to 2023. However, the valuation estimated pre-tax operating profits of 3.5 billion KRW from 2024 and 4.5 billion KRW in 2028.

However, in reality, Gwangjin Sanjeon recorded sales of 10.7 billion KRW and a net loss of 2.4 billion KRW up to the third quarter of last year. Unless a large profit occurred in the fourth quarter of last year, there could be a significant discrepancy from the performance estimates.

Former director Seo stated, “CEO Ryu inflated the corporate value of Gwangjin Sanjeon from about 14.2 billion KRW in 2022 to 21.4 billion KRW to have Baion acquire it,” and “CTM used this to repay the 7 billion KRW loan raised for acquiring Baion’s shares, effectively conducting a leveraged buyout (LBO) of Baion, which ultimately caused losses to Baion and its shareholders.”

Attempts to contact CEO Ryu Jin-hyung and Baion for comment were unsuccessful.

Meanwhile, Baion received a preliminary notice from the Korea Exchange to be designated as an unfaithful disclosure corporation due to two cases of delayed disclosure, including delaying the announcement of a share transfer contract involving a change in the largest shareholder, and one case of disclosure reversal.