The court sentenced Cellivery's founder and CEO, Cho Dae-woong, to 15 years in prison, making him the first corporation to list under the growth exception. Prosecutors said he raised funds under the banner of new drug development but used the money for purposes other than stated and avoided losses by using nonpublic information. The court also ordered Cho to pay a fine of 210 billion won and forfeit about 510 million won.
The Criminal Agreement Division 14 of the Seoul Southern District Court (Presiding Judge Lee Jeong-hee, Director General) handed down the sentence to Cho on the 20th on charges including fraudulent unfair transaction under the Financial Investment Services and Capital Markets Act. A company director surnamed Kwon, who was indicted alongside him, was sentenced to five years in prison and fined 110 billion won.
Cho and others raised about 70 billion won in 2021 through the issuance of convertible bonds and other means and disclosed that the funds would be used for new drug research and development, but they are accused of actually acquiring a wet tissue manufacturer and lending that company more than 20 billion won without collateral. In 2023, they also allegedly avoided more than 500 million won in losses by selling shares in advance, knowing in advance about Cellivery's designation as an administrative issue and the suspension of trading.
The court said, "This is a crime with significant social harm that undermined trust in information and the fairness of transactions in the capital market," adding, "It is a serious crime that caused distrust in the market and corporations and shook the foundation of the market economy order."
Regarding Cho, the court said, "As the top decision-maker, the responsibility is very heavy," and rebuked that he "betrayed the trust of investors and the market."
Earlier, in Jun., prosecutors sought a 30-year prison term for Cho.
Cellivery entered KOSDAQ in Nov. 2018 through the country's first growth exception listing system. The growth exception listing is a system that eases some listing requirements to support the listing of corporations with strong growth potential, even if they currently lack sufficient earnings.
Cellivery drew attention for developing new drugs such as treatments for Parkinson's disease and COVID-19, but after a refusal of audit opinion and complete capital impairment, it was delisted last year.