MBK Claims "Choi Yoonbum Made Initial Investments Followed by Company Funds"... Korea Zinc Refutes "Arbitrary Fabrication"

MBK: "Misappropriation for Private Gain, Not an Accounting Error"
Korea Zinc: "Distorting Public Opinion Again... We Will Hold Them Legally Responsible"

Ahead of Korea Zinc’s extraordinary general shareholders' meeting scheduled for September 9, the MBK Partners and Young Poong Consortium, the company's largest shareholder, raised allegations on August 25 that Chairman Choi Yoonbum, an inside director, and his family had pursued private interests.

In response, Korea Zinc refuted the claims by stating, “They have unilaterally disseminated assertions taken out of context and pieced together from selectively excerpted information, omitting the actual facts and circumstances.”

In its recently released second proxy solicitation material, MBK claimed it had uncovered circumstances showing that Choi and his family had first invested their own funds in an unlisted entertainment company, after which a private equity fund—virtually funded solely by Korea Zinc—subsequently injected 69 billion won. MBK argued, “This represents a significant internal control failure, in which the company’s resources were diverted for the personal interests of certain executives rather than all shareholders.”

MBK: “Personal acquisition first, company funds follow”

MBK filed a derivative lawsuit against Director Choi and CEO Park Kideok in January of last year, and through this lawsuit, secured copies of the criminal records regarding Ji Changbae, CEO of One Asia Partners, in an embezzlement case as of August 6. They explained that transaction details were identified based on findings from the investigation by the Seoul Southern District Prosecutors’ Office. Ji was convicted of embezzlement in October of last year. However, the records pertain to Ji’s embezzlement, and there has been no judicial ruling regarding Choi’s or his family’s investments themselves.

One Asia Partners is a startup private equity firm invested in by Korea Zinc shortly after Choi became CEO, with a total cumulative investment of about 560 billion won. Of the eight funds managed by the company, Korea Zinc was, in effect, the sole limited partner (LP) in six.

According to MBK’s disclosed materials, the investment sequence was as follows: For Arc Media, Choi’s side acquired convertible bonds worth 1.2 billion won in 2019 and 1.7 billion won in 2020, after which One Asia Fund invested 29 billion won. For Highhat, it’s estimated that Choi's family acquired shares at the time of its establishment in 2021 and, as of 2023, held a 33.34% stake. One Asia Fund invested 32 billion won there. Choi and his cousins initially invested 24.4 billion won in convertible bonds in Slingshot Studio, with One Asia Fund following up with 8 billion won. This amounted to six transactions across three companies, totaling 69 billion won. All were media and entertainment companies unrelated to the company’s main business of refining.

MBK argued that such a structure “raises grave concerns that the investment design—Choi personally investing first, followed by One Asia Partners—may have been set up to facilitate his private gain.” The claim is that when a large subsequent investment enters a non-listed company, its value rises, allowing the initial investor to cash out under more favorable terms. MBK further pointed to evidence showing that Korea Zinc purchased notes and bonds issued by firms controlled by Ji, funded them, and then those bonds were repaid from money invested by One Asia Fund—amounting to what MBK called a “Ponzi-like” scheme.

MBK: “Not a simple accounting mistake” …Direct rebuttal to ‘passive investor’ explanation

Korea Zinc has previously maintained that, regarding its investments in One Asia Partners, “As an LP, Korea Zinc has no control over what businesses the fund invests in.” Regarding accounting supervision sanctions by the Securities and Futures Commission earlier this year, Korea Zinc explained, “This was not intentional accounting fraud or wrongdoing by management, but an issue of accounting judgment related to the recognition, timing, and evaluation assumptions of investment assets and subsidiaries, as well as classification of periods and disclosure procedures.”

MBK refuted this explanation. Given the repeated pattern of initial personal investments followed by subsequent company-backed investments, MBK said, “It is difficult to see Korea Zinc’s investment as a simple blind fund investment solely under the GP’s independent judgment,” emphasizing that “Choi was CEO of Korea Zinc at the time.” MBK further claimed that through this series of transactions, both Choi and Ji appeared to have gained personal economic benefit.

Furthermore, MBK said, “While Korea Zinc admits to the accounting violations, it has made no mention of the objective evidence found in the criminal records to which minority shareholders have no access.” Regarding recent sanctions, MBK said, “This is not simply an issue of accounting or disclosure,” asserting, “At its core, it is a problem of misappropriation of company assets for private gain and defending management control.”

Korea Zinc: “Unilateral claims for hostile M&A… Will seek legal responsibility”

Korea Zinc issued a rebuttal statement in the evening, saying, “MBK and Young Poong, in an effort to push through a hostile M&A, are distorting public opinion and damaging our and management’s reputations. We urge them to cease such actions immediately.”

Korea Zinc also raised concerns regarding the nature of MBK’s materials. These records are investigation and trial materials from a separate criminal case currently under appeal at the Seoul High Court—they are “unconfirmed materials,” where the court’s final judgment has not been made and there are still disputes regarding the reliability of testimony and evidence. Korea Zinc further stressed that, regarding the court ruling cited by MBK, “We were in fact recognized as the victim.”

Korea Zinc reiterated its previous position on the One Asia investment: As an LP, it only provided funds; the selection of individual investments and investment decisions were made independently by the GP, and all activities were conducted under applicable laws and internal regulations as normal business operations.

Korea Zinc argued that the disclosure and external use of records obtained through litigation for purposes unrelated to the litigation itself is strictly prohibited under the Criminal Procedure Act (Articles 266-16, 59-2, etc.), and insisted that the circumstances under which these materials were obtained and provided should be investigated.

Korea Zinc added, “We will pursue all possible civil and criminal legal actions to hold those responsible fully accountable for any acts, including not only defamation arising from distortions of fact but also the improper leak or use of court records and the use of such materials for solicitation of voting rights, all of which may constitute illegal conduct.”

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