A listed South Korean company has filed a criminal complaint against MBK Partners Chairman Kim Byung-ju and Homeplus executives. The complaint alleges that the executives fraudulently issued short-term bonds tied to Homeplus while knowingly concealing an imminent credit rating downgrade, causing investors to suffer massive losses.
The company recently filed a complaint against MBK Partners Chairman Kim Byung-ju, Vice Chairman Kim Kwang-il, and Homeplus CEO Cho Joo-yeon on charges of fraud under the Act on the Aggravated Punishment of Specific Economic Crimes, sources said on March 31.
According to the complaint, the company purchased 13.8 billion won ($9.4 million) worth of Homeplus short-term bonds, including asset-backed short-term bonds (ABSTB), between Jan. 10 and Feb. 28. The last day the company bought the bonds, on Feb. 28, Homeplus’s credit rating was downgraded from A3 to A3-. Four days later, around midnight on March 4, Homeplus filed for court rehabilitation, which the court approved 11 hours later.
The company claims that MBK executives knew Homeplus was at risk of defaulting on its bonds yet misled investors about Homeplus’s financial stability.
“Under Chairman Kim Byung-ju’s direction, Homeplus management reassured securities firms that Homeplus was in good financial health and had no plans to file for rehabilitation,” the complaint states. “In reality, they were fully aware of the impending bond default and planned to file for rehabilitation shortly, but chose not to disclose such information to investors and brokerage firms.”
A representative from The Kim Law Firm, which is representing the company suing MBK and Homeplus executives, emphasized the severe consequences of the alleged deception. “The company [that purchased Homeplus-tied short term bonds] is now in a dire situation due to the misconduct of MBK executives.” The law firm added, “The damage is not limited to a single company as it poses a serious threat to the national economy,” and called for a “swift and thorough investigation by authorities.”
As of March 3, the outstanding balance of Homeplus-issued short-term bonds amounted to 594.9 billion won ($405 million), with roughly 207.5 billion won sold to retail investors through brokerage firms.
The Financial Supervisory Service (FSS) is investigating when Homeplus began preparing for court receivership and whether it continued issuing bonds despite knowing a court filing was imminent. If it is determined that Homeplus issued nearly 600 billion won worth of short-term bonds while planning for rehabilitation, the company could face charges related to fraudulent issuance and sale.
MBK Partners said Homeplus began preparing for the court filing on Feb. 28 and that the board of directors officially approved the filing on March 3.
