The Financial Supervisory Service has detected allegations that the internet broadcasting platform SOOP inflated its sales and has initiated an investigation.
According to financial authorities and the industry on the 11th, SOOP secured advertisements and hired its streamers, counting the entire amount of secured advertisements as sales. The FSS believes that the net amount, excluding the payment made to the streamers from the secured amount, should have been recognized as sales. This is similar to Kakao Mobility, which received a severe penalty for recognizing what should be viewed as net sales as aggregates in the previous year.
The FSS is examining SOOP's sales from 2020 to the third quarter of 2024. Among these, the controversial game content advertising sales are 2 billion won in 2020, 12 billion won in 2021, 27 billion won in 2022, 4 billion won in 2023, and a cumulative 11 billion won from the first to the third quarter of 2024.
The most important factor in determining the sentencing for financial fraud is the motive. Whether SOOP inflated its accounting knowingly and intentionally or if it was simply a misjudgment can greatly influence the sentencing.
SOOP stated, "The part that the FSS is examining does not account for a large proportion of total sales, and we have no motivation to inflate sales, such as through an initial public offering (IPO) or attracting investment."
The external auditor of SOOP, an accounting firm, also did not challenge the net method. SOOP noted, "In the past, the accounting firm examined certain phrases in the game content advertising contracts during the external audit process and found them questionable, so they confirmed additional materials and transactions and determined that recognizing them as aggregates was appropriate." They added, "The past accounting firm never pointed out that we should recognize the amounts as net rather than aggregates during the external audit process."
However, the likelihood that this rationale will be accepted by the financial authorities is low. Kakao Mobility also recognized sales using the aggregates method, and the external auditor at that time, Samil, also accepted the aggregates method. Nevertheless, the financial authorities determined that just because the accounting firm approved it does not mean that there are no issues with the sales recognition method. Kakao Mobility received a penalty surcharge of 3.4626 billion won, and CEO Ryu Geung-sun and former Chief Financial Officer (CFO) received a penalty surcharge of 692.4 million won, and they corrected the sales recognition to the net method.