This article was displayed on the ChosunBiz MoneyMove (MM) site at 5:08 p.m. on Jan. 16, 2026.
With arrest warrants dismissed for Chairman Kim Byung-ju and other MBK Partners executives, the court is understood to have found it particularly difficult to accept the prosecution's claim that they had been preparing "fraudulent acts for about a year." The court signaled that the causal and connective links were not sufficiently substantiated in the prosecution's logic that measures taken in 2024—such as revaluing land assets and omitting disclosures—were advance work in a chain of events that led to the issuance of short-term notes in Feb. 2025, a credit rating downgrade, and the filing for court receivership.
This warrant review hearing lasted 13 hours and 40 minutes, the longest on record. That suggests prosecutors and MBK directly clashed over whether the measures in 2024 and the events around the 2025 receivership filing could be viewed as "a single scheme."
Given the court's decision, prosecutors now face the task of bolstering evidence to support allegations of MBK's intent and premeditation. In the industry, many say the Financial Supervisory Service faces growing pressure, ahead of its sanctions review committee, to more clearly present the legal basis and factual links on core issues including changes to the terms of redeemable convertible preferred shares (RCPS).
◇ 2024 land revaluation, omission of joint guarantees, failure to disclose early redemption clause... a build-up for a receivership filing?
According to the investment banking industry and according to legal sources on the 16th, Presiding Judge Park Jeong-ho, who handles warrants at the Seoul Central District Court, on the 13th dismissed arrest warrants for MBK Chairman Kim Byung-ju, Vice Chairman Kim Gwang-il, Executive Vice President Kim Jeong-hwan, and Homeplus Co. Senior Executive Director Lee Seong-jin.
The court explained the reason for dismissal via a text message shared with the court press corps, saying, "Based on the materials submitted so far, there is insufficient substantiation of the allegations to justify detention," and, "In particular, with respect to subjective elements such as intent, and proof grounded in logic or evaluative aspects, a thorough analysis and impeachment process may be necessary."
The "insufficient substantiation of allegations" the court cited meant that the prosecution's logic—that MBK had planned and prepared fraud and fraudulent unfair trading for about a year—was not sufficiently established. Judge Park is said to have determined it is difficult to recognize measures MBK and Homeplus Co. took in 2024 as preparatory acts for a fraud scheme.
At the warrant hearing, prosecutors were said to have emphasized that MBK ▲ revalued Homeplus Co.'s land assets, ▲ failed to record in the audit report that MBK provided a joint guarantee on Homeplus Co.'s 250 billion won borrowing, and ▲ did not inform the credit rating agency that there was an early redemption clause when borrowing from Meritz Securities. They argued this series of acts was all advance work to prepare for the "fraud" in Feb. last year.
Homeplus Co. is suspected of having deliberately inflated the value by about 700 billion won when it conducted an asset revaluation of its land holdings in May 2024. The allegation is that it falsified real estate values to create conditions for liquidity raising.
Homeplus Co. borrowed 100 billion won from Hanwha Investment & Securities in Dec. 2023 and 150 billion won from Hana Securities in Oct. 2024, and MBK allegedly provided a joint guarantee at the time but failed to record that fact in the audit report. As a result, the market could not properly assess Homeplus Co.'s financial condition, the allegation goes.
An IB industry official said, "When a controlling shareholder even provides a joint guarantee to borrow money, it is often taken as a signal that the company's own liquidity and credit are that weak," adding, "For Homeplus Co., which must keep rolling over short-term borrowings like CP or short-term notes, whether there is a guarantee is a key variable in credit assessment. If this fact is hidden, it is hard for investors and rating agencies to distinguish risks stemming from 'the company's own credit' versus 'controlling shareholder support.'"
In addition, prosecutors say Homeplus Co. refinanced acquisition financing in May 2024 with Meritz Financial as lead manager, and even though there was an early redemption clause, it did not inform the rating agency.
Shinyoung Securities, which handled the sale of Homeplus Co. bonds, said, "We learned only after the receivership filing that false information had been specified, including that all borrowings subject to early repayment were recorded as 'repayment in May 2027,'" and argued, "Had we known this in advance, we would have felt burdened by Homeplus Co.'s funding situation." MBK, however, has maintained that it properly disclosed the early redemption clause and that the prosecution's claim is false.
Prosecutors argue that this series of actions was a kind of "build-up" for events in Feb. 2025—namely, Homeplus Co.'s issuance of short-term notes, the credit rating downgrade, and the receivership filing.
Prosecutors believe that, because revealing the company's difficulties would have made liquidity raising impossible, MBK manipulated the numbers to make it look healthy, concealed the deterioration of its finances even up to the last-minute issuance of short-term notes, and then moved swiftly to receivership as soon as the credit rating was downgraded.
◇ MBK says it "tried until the end and chose receivership as a last resort"
MBK's position is the exact opposite of the prosecution's claim. It says the credit rating fell despite its best efforts to prevent receivership until the last moment. An MBK official said, "As soon as we received the first notice that the credit rating would be downgraded right before last year's short-term note issuance, we worked to prevent the actual downgrade, and changing the RCPS put option into a call and reflecting RCPS as capital instead of a liability happened in that process."
Even so, once the credit rating fell, MBK could no longer raise funds in the market, it says, and it filed for receivership as a last resort to freeze debt and pursue restructuring to keep operations running normally.
Legal sources say the court's view that the 2024 events—the "front-end" acts—lacked substantiation of their connection as preparatory acts for fraud and fraudulent unfair trading is, for now, a positive signal for MBK. It means the prosecution's painstaking effort to prove "connectivity" failed to gain traction at the warrant stage.
◇ FSS sanctions review delayed again... issues differ, but proof must be more thorough
Meanwhile, the Financial Supervisory Service's sanctions review of MBK was postponed again on the 15th, following last month. It reached no conclusion and will be revisited later. The FSS says the matter is so complex that commissioners need ample discussion.
Earlier, in Nov. last year, the FSS gave MBK prior notice of heavy sanctions that include a "suspension from duty." It is the first case of financial authorities pursuing heavy sanctions against a private equity fund general partner (GP). The sanction levels are, in order, "institutional caution–institutional warning–suspension from duty within six months–dismissal recommendation."
The core issues in the FSS sanctions review differ from what prosecutors are examining. Financial authorities are reviewing whether MBK may have harmed the interests of limited partners (LPs), including the National Pension Service, by changing Homeplus Co.'s RCPS from a liability to capital. Unlike prosecutors, they do not have to directly prove "intent to deceive," but must show that decision-making procedures, stakeholder protection, and control systems functioned properly.
In the industry, many believe that the higher the sanction level, the more crucial it will be for the FSS to present, in concrete terms, the causal relationship between RCPS term changes and LP gains or losses, and whether procedures to prevent conflicts of interest functioned.