Executives Indicted for Pocketing 5.8 Billion Won Through 'Round-Tripping Investments' Using Customer Funds

Low-Interest Loans of 182.8 Billion Won to Private Companies
Profits Gained Through Loan Businesses and P2P Investments
Crimes Concealed by Preparing False Financial Statements

The management of a well-known gift certificate issuing company has been brought to trial after using customers' entrusted gift certificate deposit funds for high-risk investments and personally profiting by approximately 5.8 billion won.

On June 16, the Financial Investigation Division 1 of the Seoul Southern District Prosecutors' Office (headed by Chief Prosecutor Kim Min-gu) announced that it has indicted, without detention, A (age 59), the chairman of the gift certificate issuing company, B (age 51), its CEO, and C (age 55), its advisor, on charges of breach of trust under the Act on the Aggravated Punishment of Specific Economic Crimes. D (age 51), a certified public accountant who participated in the preparation of false financial statements, was also indicted without detention for violating the External Audit Act.

Seoul Southern District Prosecutors' Office. Photo by Ji-ye Lee

According to prosecutors, from June 2022 to March last year, A and others borrowed 182.8 billion won of the company's funds at an annual interest rate of 4.6%, unsecured and at low interest, through their own private companies. They then used these funds for lending to loan businesses and investing in online investment-linked financial products (P2P lending) through a "round-tripping" method, personally pocketing 5.8 billion won in the process.

The investigation found that these private companies were merely shell corporations with no real business substance. The risk of investment losses was borne by the gift certificate issuing company, while investment returns exceeding 10% per annum flowed into the executives' private companies.

The prosecution determined that a significant portion of the profits obtained by A and the others was used for bonuses to management, false consulting fees paid to a family company of Chairman A, and corporate card spending at department stores, supermarkets, and other locations. As of the end of last year, the net assets of the defendants' private companies amounted to approximately 2.75 billion won.

Additionally, A and others are accused of concealing the breach of trust by preparing and disclosing false financial statements for the 2022–2024 fiscal years, omitting transaction details with related-party corporations. Prosecutors believe that external auditor D participated in this false disclosure and helped conceal the crimes for several years.

The company was also found to have continued operations without registering with the financial authorities, even after the obligation to register as an issuer and manager of prepaid electronic payment means was established. Although its capital was only 500 million won, the gift certificate deposits received from customers amounted to about 100 billion won. Prosecutors described this as a typical corporate crime, given that the offenses continued over three years and the profits gained reached 5.8 billion won.

A prosecution official stated, "We will respond firmly to illegal activities in the financial market."

This content was produced with the assistance of AI translation services.