Allegations of Fraudulent Transactions Under the Capital Markets Act
The first trial for former Cellivery CEO Cho Dae-woong, who was arrested and indicted on charges of false disclosure including 'new drug development R&D expenses' to raise funds worth around 70 billion won, was held.
A representative of the Cellivery Shareholders' Alliance is urging punishment for Cho Dae-woong, former CEO of Cellivery. Provided by Cellivery Shareholders' Alliance
The Seoul Southern District Court Criminal Division 14 (Presiding Judge Lee Jeong-hee) held the first hearing on the 26th for Cho, who is charged with violations of the Capital Markets Act and breach of trust under the Act on the Aggravated Punishment of Specific Economic Crimes, but postponed the confirmation of charges as the defense claimed they had not reviewed the evidence records. The next trial is scheduled for 3 p.m. on the 23rd of next month.
The Cellivery Shareholders' Coalition stated, "The estimated damage is about 300 billion won," and added, "We expect the prosecution to seek a sentence of around 15 years for Cho, and anticipate the final sentence to be over 7 years."
According to the prosecution's indictment, in March 2023, when Cho received an opinion from an external auditor that "the internal accounting is practically inappropriate and there is a high possibility of receiving a disclaimer of opinion," he sold 50,968 shares of Cellivery worth approximately 517 million won held under a borrowed name.
The shares held in the borrowed name account were purchased by Cho from a financial company A in the over-the-counter market under a third party's name. In June 2022, Financial Company A notified contract termination, claiming that funds related to Cellivery convertible preferred shares acquired in September 2021 were used for purposes other than intended. Cho proposed to Financial Company A that they purchase the convertible preferred shares under a third party's name, fearing that if this fact was disclosed, other shareholders might also claim breach of contract. During this process, Cho did not disclose the stock ownership status, including purchases and sales.
In September 2021, Cho raised about 70 billion won through convertible preferred shares and publicly announced that the purpose of the fund raising was for new drug development research expenses. It was explicitly stated that there was no intention to acquire securities of other corporations. However, it is known that Cho and former Cellivery Vice President Kwon used these funds to acquire a wet tissue manufacturing company. The prosecution also pointed out that Cho and others lent 20.3 billion won to the acquisition company without collateral and without board approval.
Cellivery was noted as the first company to enter the KOSDAQ market under the domestic growth special listing system in November 2018. However, in March 2023, it received a 'disclaimer of opinion' in its financial statement audit, leading to a delisting decision last year, and liquidation trading was conducted earlier this month.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
