TMON, WeMakePrice raided for delayed vendor payments amid liquidity crisis

Prosecutors raided the headquarters of TMON and WeMakePrice on Thursday as part of an investigation into the e-commerce platforms’ delayed payments to vendors sparked by a liquidity crisis engulfing the companies.

The Seoul Central District Prosecutors Office sent investigators to the two firms’ headquarters, the home of Ku Young-bae, the CEO of their parent firm Qoo10, and seven other locations to seize computer hard drives, accounting documents and other evidence.

Earlier this week, the open-market operators filed for court receivership after failing to repay vendors using their platforms.

The government estimates that the overdue payments amount to 210 billion won (US$153.4 million). However, speculation suggests that this amount could escalate to as much as 1 trillion won if future payments are included.

TMON and WeMakePrice have been accused of continuing their business dealings despite knowing that timely payments to vendors were impossible due to liquidity issues.

Allegations under investigation also include that company executives misappropriated funds intended for repaying vendors while pursuing aggressive mergers.

Prosecutors have filed charges of fraud and embezzlement against Ku, the head of the group, and have concluded that the chiefs of TMON and WeMakePrice were in collaboration with Ku.

The amount prosecutors accused Ku of defrauding is 1 trillion won.

Appearing at an emergency parliamentary session on the incident this week, Ku admitted that funds at TMON and WeMakePrice had been diverted to acquire the U.S. online shopping platform Wish in February.

He claimed that the funds were repaid within a month and had nothing to do with the payment delays. However, suspicions have emerged that internal procedures and regulations might have been overlooked in Qoo10′s use of the subsidy funds.

Prosecutors plan to question Ku and other corporate executives as suspects after examining internal fund flows at Qoo10 as well as the size and the whereabouts of business revenues based on the seized materials.