Kross Finance KOREA, a peer-to-peer (P2P) online investment-linked finance company that entered rehabilitation proceedings (formerly court receivership) due to unsettled payments totaling about 70 billion won, is struggling to find a new owner. It reportedly held sale talks with a prospective buyer last year, but the deal is now on the brink of collapse. If the merger and acquisition (M&A) fails and liquidation is decided, Kross Finance KOREA investors are expected to be unable to recover a significant portion of their principal.
According to the investment banking (IB) industry on the 19th, the Seoul Bankruptcy Court recently scrapped the rehabilitation plan submitted by Kross Finance KOREA and also canceled the stakeholders' meeting that had been scheduled for that day. This follows Kross Finance KOREA voluntarily withdrawing its rehabilitation plan.
At the end of last year, Kross Finance KOREA submitted a rehabilitation plan to the court that aimed to normalize the corporations through a pre-approval M&A. A pre-approval M&A is a method of securing a prospective acquirer before the rehabilitation plan is approved and using it to push for normalization of the corporations.
Around September last year, Kross Finance KOREA found an interested acquirer and began negotiations. After the first prospective buyer walked away from the M&A, the process shifted to a public sale, and an e-commerce company emerged as the acquirer. Following multiple delays, the company submitted its rehabilitation plan to the court at the end of last year. The stakeholders' meeting scheduled for that day was intended to finalize this rehabilitation plan with the creditors.
However, with the sale process faltering, Kross Finance KOREA reportedly withdrew the rehabilitation plan on its own. If Kross Finance KOREA fails to complete the M&A, the court is likely to proceed with liquidation. Because there is currently no revenue, liquidation is considered more advantageous than continuing to operate the corporations. If liquidation proceeds, investors' claims may be sold to a third party.
The Kross Finance KOREA unsettled-payment crisis began in mid-2024 when a payment gateway (PG) failed to repay sales proceeds. Kross Finance KOREA sold a "card sales pre-settlement investment product" backed by small business owners' accounts receivable as collateral, but Lumen Payments, the PG company that was supposed to repay the funds, did not pay.
In a pre-settlement loan, an investor who sold products via card payments receives a loan before settlement proceeds are paid out, and the lending institution later receives the settlement funds from the PG company. According to a victims' coalition, losses from investors who put money into this product and failed to recover their principal amount to about 72 billion won.