The Ministry of Science and ICT's "independent AI foundation model project" (nicknamed the national AI) has hit a snag over stock transaction by former Blue House senior secretary for AI future planning Ha Jung-woo and artificial intelligence (AI) startup Upstage. Ha is running as the Democratic Party of Korea candidate in the Busan Buk-gap by-election for the National Assembly on Aug. 3, and when the ministry selected Upstage last August as one of five elite teams for the national AI, Ha, then serving as senior secretary for AI future planning, held Upstage stock.
Those involved have explained there is "no problem," but as the conflict-of-interest issue surfaces, the national AI project is feeling the heat. The national AI is a key initiative to achieve the Lee Jae-myung administration's policy goals of "AI top 3" and "AI for all."
Upstage CEO Kim Sung-hoon said on May 20 at the AWS Summit Seoul 2026 held at COEX in Samseong-dong, Seoul, in an interview with ChosunBiz about the conflict-of-interest controversy over the selection of the national AI elite teams, "Upstage is a corporations recognized globally." Regarding the overlap between the timing of Ha's holding of Upstage stock and the date of the national AI elite team selection, he said, "I don't know the exact schedule, but (Ha) was in the process of a blind trust, and (he) sold the shares to (Upstage) at a bargain price, so (a conflict of interest) makes no sense." Kim added, "A government project review isn't a structure where someone in the middle can easily change even one point, is it."
In August last year, the Ministry of Science and ICT selected Upstage, Naver Cloud, SK Telecom, NC AI and LG AI Research as the five elite teams for the national AI and has been supporting them with graphics processing units (GPUs) and more. Upstage drew attention as the only startup among the five elite national AI teams. Although relatively smaller than conglomerates, it ranked 12th overall on a global AI model benchmark. The Upstage consortium includes Lablup, which has GPU virtualization technology, AI model optimization startup Nota, and data corporations Flitto.
Ha held 10,000 shares of Upstage last August. Appointed senior secretary for AI future planning at the Blue House in June last year, he said that under the Public Service Ethics Act he asked Upstage to sell his shares, and that it took time between July and early August last year to find a suitable buyer. He said he then executed a blind trust on Aug. 14 last year for the Upstage shares at the center of the controversy.
The Ministry of Science and ICT maintains there is no conflict-of-interest issue because the Blue House senior secretary for AI future planning does not directly intervene in the national AI project. A ministry official said, "We reviewed whether there was any potential for controversy as talk of a conflict of interest arose (regarding the selection of the national AI elite teams), and there was absolutely nothing that posed any problem."
In January this year, after the first-round evaluation, the Ministry of Science and ICT selected Upstage, LG AI Research, and SK Telecom as elite teams advancing to the second round. The plan is to conduct development including late-joining Motif Technology, then hold the second-round evaluation and release the results in August.
Some say that although Upstage was included among the five elite national AI teams last year and passed the first-round evaluation, the conflict-of-interest issue that erupted later could become a variable in the second round.
Lee Kyung-joon, head of investments at Aeol Asset Management, said, "If, when the Ministry of Science and ICT selected Upstage as an (national AI) elite team, candidate Ha was in the process of placing his Upstage shares in a blind trust, it may not be a legal problem, but because a 'process' is not a full disposal of the shares, strictly speaking it cannot be free from controversy over interests and fairness."
An AI industry official said, "A conflict of interest means that gains and losses can come and go depending on the outcome of the matter, and regardless of how much gain there was, it will not be easy to win the public's judgment that selecting and releasing the five elite national AI teams at a time when former senior secretary Ha held Upstage shares was fair," adding, "In the national AI selection funded by taxes, the Ministry of Science and ICT will not be able to ignore public opinion going forward."