Baion Faces Third Accusation, This Time for Violating the Capital Markets Act

“Consecutive Convertible Bond Issuances and CM Tech Acquisition Raise Concerns”
Third Complaint Filed, Including G&Equity and Gwangjin Sanjeon Acquisitions

Ryu Jin-hyung, CEO of KOSDAQ-listed company Bion, along with the largest shareholders, has been accused of breach of trust and fraudulent unfair trading. This follows previous issues related to Bion's investment in G&Equity, the acquisition of Gwangjin Sanjeon, and now problems have also arisen regarding the acquisition of a company called ‘CM Tech’.

On the 27th, according to the financial investment industry, former Bion inside director Seo Dong-il filed a complaint with the Seoul Southern District Prosecutors' Office against Ryu Jin-hyung, CEO of Bion, Jeon Sun-ho, CEO of CTM, the largest shareholder, investor Hong Mo, and Jeong Eui-hyun, CEO of Bion affiliate CM Tech, on charges of fraudulent unfair acts and breach of trust under the Capital Markets Act.

According to the complaint, on May 16 last year, Bion issued the 41st convertible bonds (CB) worth 10.5 billion KRW against Park Jong-yeon. Bion originally disclosed the purpose of issuing these CBs as operating funds but changed the disclosure on June 7 last year to state the purpose as funds for acquiring securities of other companies. The plan was to acquire an unlisted company called ‘CM Tech’ using the CB funds.

After changing the disclosure, Bion immediately announced that it would acquire 100% of the shares of CM Tech, which operates in medium-sized parts, hydraulic machinery, and parts manufacturing and sales, for 11 billion KRW. The transaction counterparties were Daeyang Comprehensive Development and two others. Bion signed the sales contract on June 7 and paid the remaining 10 billion KRW on June 13, the following week.

On the payment date of June 13, Bion also decided to issue the 42nd CB worth 10 billion KRW. The purpose was to redeem the 41st CB issued to Park Jong-yeon a month earlier. The issuer was a corporation named ‘Neuron’.

In the complaint, former director Seo stated, “Issuing and redeeming convertible bonds repeatedly within about a month is an incomprehensible financial activity,” and pointed out, “This is essentially just ‘printing’ convertible bonds and creating self-issued bonds.”

He also claimed, “Park Jong-yeon, the subscriber of the 41st CB, is the CEO of Neuron, the subscriber of the 42nd CB, and Neuron is a corporation with a capital of only 1 million KRW, which can be seen as proof that the CB issuance was for improper purposes,” and argued, “The source of the 10 billion KRW paid by Neuron must be clarified.”

Furthermore, he emphasized, “It is questionable whether CM Tech, acquired by Bion, is worth 11 billion KRW, and it is also an unreasonable act to pay the entire acquisition price on the contract day,” adding, “Moreover, it is hard to understand that the company CM Tech, acquired at a large cost, continues to be operated by the transferor, defendant Jeong Eui-hyun, and that loans amounting to several hundred million KRW have been extended recently.”

Attempts to contact Bion for inquiries were met with a refusal to comment from a Bion representative.

Meanwhile, former director Seo, along with Bion’s former auditor, filed a complaint last month accusing CEO Ryu and others of embezzlement and breach of trust for causing losses to the company by investing in a corporation called G&Equity. Additionally, on the 19th, they filed another complaint alleging embezzlement and breach of trust for causing Bion to acquire shares of Gwangjin Sanjeon, a subsidiary of the largest shareholder CTM, at an inflated price.