[Exclusive] Former Edison Motors Chairman Youngkwon Kang Acquitted of '10 Billion Won Loan and Investment Fraud' Charges [Invest&Law]

"Failure in Business Does Not Constitute Fraud"
Acquitted in First and Second Trials; Prosecution Does Not Appeal
Separate Stock Price Manipulation Case Awaits Appeal Trial

Youngkwon Kang, former Chairman of Edison Motors, who had been on trial on charges of receiving loans and investments totaling around 10 billion won through falsified business plans, has been acquitted with the decision finalized.

According to the legal community on September 16, the Seoul High Court Criminal Division 13 (Presiding Judges Kim Mooshin, Lee Woohee, and Yoo Donggyun) recently upheld the acquittal in the appeal trial of former Chairman Kang, who was indicted for fraud under the Act on the Aggravated Punishment of Specific Economic Crimes, just as the court of first instance had ruled. Executive Cha, who was indicted on the same charges, was also acquitted. As the prosecution did not file an appeal, the verdict has now been finalized.

"Failure to Achieve Results Does Not Constitute a Fabricated Development Plan"

Previously, former Chairman Kang and Cha had been brought to trial on charges of obtaining a combined 7 billion won in loans and investments from the Korea SMEs and Startups Agency in 2019 by presenting plans for the mass production of electric trucks and the commercialization of MSO coil motors. In addition, in 2021 and 2022, they were accused of receiving a 3 billion won investment from a VC association after sending materials containing false information, even though they were aware of the high likelihood that the attempt by the Edison Motors Consortium to acquire Ssangyong Motor would fall through, which was considered a crucial factor by the VC association in its evaluation.

During the trial, the prosecution argued, "The defendant deceived the Korea SMEs and Startups Agency while knowing the business plan was impossible to realize. In addition, he provided misleading information to the VC association by falsely presenting that the funds needed for the Ssangyong Motor acquisition had already been secured or even exceeded." The prosecution requested a prison term of 10 years for both Kang and Cha.

The court of first instance acquitted both individuals. The reasoning was that even if they failed to actually achieve the targets outlined in the business plan explained to the Korea SMEs and Startups Agency, that alone does not make the business plan itself false. The court also ruled that there was no proof of intentional deception or fraud regarding the funds obtained for the purpose of acquiring Ssangyong Motor.

The appellate court concurred with this assessment. The panel of judges stated, "It is difficult to definitively conclude that, at the time of investment, the business plans for electric trucks and MSO coil motors were completely unfeasible. It appears that the Korea SMEs and Startups Agency and the VC association made their investment decisions after considering the possibility that the business plans might not succeed or that there could be risks in securing funds for the Ssangyong Motor acquisition."

Stock Price Manipulation Case Is a Separate Trial...3-Year Prison Sentence in First Instance

Meanwhile, former Chairman Kang has also been indicted in a separate case for violations of the Capital Markets Act and is awaiting an appellate trial. He stands accused of having unlawfully obtained 162.1 billion won by artificially inflating the share price of Edison EV through positive news about the planned Ssangyong Motor acquisition and by issuing false disclosures in 2021 and 2022.

Youngkwon Kang, former Chairman of Edison Motors

At that time, following the commencement of Ssangyong Motor's corporate rehabilitation procedure, firms including Edison Motors expressed interest in an acquisition, and Edison Motors was selected as the preferred bidder in October 2021. However, the acquisition ultimately failed in March 2022 when Edison Motors could not pay the balance of the purchase price. Consequently, the price of Edison EV stock plummeted, leading to delisting.

The court of first instance for the Capital Markets Act violation case stated, "Kang spread false information and instructed the creation of fake sales figures with the purpose of influencing the stock price," sentencing him to three years in prison and a fine of 500 million won. However, the court did not remand him to custody, taking into consideration his lengthy previous detention, his advanced age, and the fact that he never missed a court appearance. Additionally, the court found him not guilty on the charges of breach of trust and bid-rigging under the Act on the Aggravated Punishment of Specific Economic Crimes.

After Kang was acquitted of breach of trust and bid-rigging, some affected shareholders reacted by filing a complaint with the Corruption Investigation Office for High-ranking Officials (CIO), citing "judicial distortion" against presiding judge Kim Sangyeon, who handled the first trial for the Capital Markets Act violation case.

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