Qoo10 CEO Ku Young-bae pledged a "complete recovery of damages" related to the payment delays affecting its struggling e-commerce affiliates, Tmon and WeMakePrice, with government support.
Addressing the National Assembly’s Political Affairs Committee on Tuesday, Ku's commitment followed the companies' court receivership filing the previous day.
"We will be at a standstill if business operations halt now," Ku said, adding that, with minimal assistance, complete recovery of damages is achievable.
However, Ku's assurances have been met with skepticism as he and the companies have yet to present a clear plan for extending capital, despite the escalating damage to consumers and vendors.
As of last week, the amount of delayed payments to vendors by the two platforms totaled approximately 213.4 billion won ($154.2 million), with the amount expected to rise up to 1 trillion won with more transactions nearing settlements.
Anticipation surged initially when Ku announced on Monday that he would "commit to using all available resources," including securing Qoo10's overseas capital and leveraging its assets and shares as collateral.
However, at Tuesday's hearing, Ku revealed that only up to 80 billion won in capital from the group is available, with the exact amount that can be effectively utilized remaining unclear.
Ku's promise to use his 38 percent stake in Qoo10 also appears insufficient, as the value of these shares -- once worth 500 billion won, as per Ku -- should have significantly declined.
Under such circumstances, concerns about increased risks for vendors have only heightened following Tmon and WeMakePrice's filing for court receivership.
While court receivership allows companies to restructure debts under court supervision, it poses significant risks for creditors as vendors will face delays in repayments as their claims are temporarily suspended.
After receiving receivership applications, the Seoul Bankruptcy Court on Tuesday issued a preservation order and a comprehensive injunction against the companies, freezing their assets and liabilities and banning individual debt recovery actions.
The creditors are unlikely to recover the full amount owed once rehabilitation proceeds. The process mainly focuses on debt adjustment to revive the company, which may entail a part of the debt claims being forsaken for the purpose.
Should the rehabilitation application be denied and the firms face bankruptcy, recovery of payments will become even more challenging. With the two companies having endured prolonged capital impairment, the vendors will be placed at low priority in repayment processes, leaving them with little to no chance of recovery.
The court will review the companies' applications and determine on their rehabilitation within a month.
Experts doubt the court will approve the rehabilitation applications. "Given the current financial status, recovery seems nearly impossible. Even if the companies present assets that have not been unveiled until now, it's unlikely to alter the outcome," said professor Suh Yong-gu of Sookmyung University.
Ted Koo, an attorney at Law Firm Lin, noted that even if the rehabilitation process begins, the same problem remains. "If the firms do not establish a viable plan to pay their debts, the process can be terminated."
Some suggest that a merger or acquisition could provide recovery options for vendors.
However, Suh viewed this as unlikely, noting that any new owner would have to inherit the extensive debt. "Who would be willing to take on such a burden? It's not just the customers who have turned their backs; the market has essentially written off these companies," he added.
The companies have also applied for an autonomous restructuring support program — a court-mediated process that comes before the rehabilitation process. This process usually takes around three months, with rehabilitation proceeding if mediation fails.
While repayments may come if agreements are made through ARS, this comes at the risk of a chain reaction of bankruptcies, warned Bang Ki-hong, head of the Korea Federation of Small and Medium Businesses.
"Small merchants affected may not survive months of liquidity freezes, impacting a wide range of contracted entities and causing significant societal ripple effects," Bang said, adding the situation needs to be handled by the government to prevent further damage.
Meanwhile, the prosecution has launched a probe into the case, with potential charges including fraud, embezzlement, breach of fiduciary duty and violations of e-commerce laws. Additionally, police are conducting a separate investigation after a group of customers filed a criminal complaint against key officials of the platforms and Qoo10, including Ku, on Monday.
