The Financial Services Commission decided to impose a penalty surcharge on three corporations that prepared and disclosed financial statements in violation of accounting standards.
The Financial Services Commission said it held its 17th meeting on the 1st and resolved to impose a penalty surcharge on three companies—Soup, Sejin, and Shingi Tech—and related company officials.
Soup (formerly AfreecaTV) violated accounting standards by overstating operating revenue and operating expense in 2021 and 2022. As an agent that arranges advertising services for game content through personal broadcasting, it should have recognized the related revenue on a net basis, but it recognized it on an aggregates basis, overstating revenue and expenses.
Soup received a penalty surcharge of 1.49 billion won and a three-year designation of auditor. The former CEO and the current responsible executive were each imposed a penalty surcharge of 27.1 million won.
Sejin was sanctioned with a penalty surcharge for overstating accounts receivable, borrowing fund from affiliates, and gains on debt repayment from 2020 to 2022. Even after collecting accounts receivable through an affiliate, it did not remove them from the books and entered into sham borrowing contracts. Some of the borrowing fund created in this process was made to appear as if repayment had been waived by an affiliate, inflating net income for the period.
It also asked overseas counterparties to send false confirmations of receivables and debt to obstruct the external auditor's audit. It forged and provided audit materials such as special agreements for receivables settlement and borrowing covenants.
For these alleged actions, the company received a penalty surcharge of 180 million won and a two-year designation of auditor. The CEO and the former responsible executive were imposed 17.7 million won each, and the auditor 6 million won, in penalty surcharges.
Shingi Tech also overstated shareholders' equity by recognizing long-term loans and long-term advances from contracts that had no rights and obligations related to the transaction. It is also accused of creating false documents to obstruct the external auditor's audit. The Securities and Futures Commission imposed a penalty surcharge of 30 million won and a two-year designation of auditor on Shingi Tech, and a penalty surcharge of 3 million won on the CEO.