Cross Finance, an online investment-linked finance (previously P2P finance) firm, has sparked public outrage among victims as it has recently made only a minimal partial repayment to investors related to the 72 billion won unaccounted situation.
Previously, Cross Finance sold a "card revenue pre-receivable investment product" backed by receivables, targeting small and medium-sized enterprises with specialized financial services. However, the payment gateway company Lumen Payments, which was supposed to repay the money, failed to make timely payments, leading to issues. The pre-receivable loan structure allows investors who sold products through card payments to borrow before receiving settlement payments, which the lending institution later collects from the payment gateway company.
According to the financial industry on the 17th, Cross Finance recently began partial principal repayments to investors. Cross Finance announced on its website that "we have recovered some funds by attaching a corporate account through debt collection and distributed them to investors based on their investment ratios for each pre-receivable product."
However, the amounts distributed to investors were extremely small. The total amount seized from two borrowers was only about 8.5 million won, accounting for just 0.06% and 0.2% of the money each borrower has to repay. Cross Finance paid this to the investors based on their investment shares, resulting in some investors receiving refunds of only a few thousand won, and in some cases as little as a few hundred won.
Investors are concerned that Cross Finance may be engaged in what is colloquially called a "window-dressing" type of repayment, minimizing their accountability. More than six months have passed since the unaccounted situation occurred, but investors found it difficult to know even the status of related proceedings or debt collection. Notably, as it was revealed that the pre-receivable firm and the electronic payment gateway company were effectively the same corporation, some investors have hinted at potential lawsuits. Investigations following the incident revealed that the representatives of the payment gateway company Lumen Payments and about 11 pre-receivable companies were the same individual, which allegedly exacerbated the damages by heavily focusing loans on the same corporation.
After the unaccounted situation occurred, it was revealed during a prosecutor's investigation that Kim In-hwan, the representative of Lumen Payments, established a paper company to create false receivables and embezzled funds through a pre-receivable loan process. The amount misappropriated from Cross Finance is estimated to be around 72 billion won. Cross Finance is set to begin rehabilitation procedures in December of last year and plans to submit a rehabilitation plan at the end of this month.
Meanwhile, investment victims are submitting petitions urging investigations against representative Kim, who triggered the repayment inability. The petitions call for an investigation into hundreds of billions of won in funds, approximately 100 billion won, that Kim allegedly embezzled or misused, with details of the expenditures being unaccounted for and the whereabouts of some funds being unclear. Victims argue that if the prosecution can find and seize Kim's hidden assets, it could reduce the scale of damages, which could amount to several hundred billion won.