Byunghoo Kim of MBK and Homeplus Executives Reported to Prosecutors for Fraud and Breach of Trust

Robex Files Complaint with Seoul Central District Prosecutors' Office on June 27

Byunghoo Kim, Chairman of the private equity fund MBK Partners, and the management team of Homeplus have been reported to the prosecution on charges of fraud and breach of trust under the Act on the Aggravated Punishment of Specific Economic Crimes.

Law firm Robex (Managing Partners: Kidong Kim and Dongyeol Lee) announced on June 27 that, acting on behalf of investors in Asset-Backed Electronic Short-Term Bonds (ABSTB) and Commercial Paper (CP), it has filed a complaint with the Seoul Central District Prosecutors' Office against Byunghoo Kim, Chairman of MBK Partners, Kwangil Kim, CEO of Homeplus, and related personnel from Lotte Card.

According to the complaint, after Homeplus filed for corporate rehabilitation on March 5, the entire amount of ABSTB worth 341.9 billion won, CP worth 116 billion won, and electronic short-term bonds worth 72 billion won?totaling 557.9 billion won?issued between December 5 of last year and February 25 of this year, remains unpaid.

Robex points out that legal precedent was established in the 2011 LIG Construction and 2013 Tongyang Group cases, holding that issuing commercial paper and similar instruments despite the likelihood of non-payment at maturity, thereby leading to default, constitutes fraud by willful negligence. If more victims emerge in the future, Robex plans to initiate a class action lawsuit seeking damages against MBK, Homeplus, Lotte Card, and key executives.

In particular, unlike previous complaints, this filing focuses on CP-related damages amounting to approximately 200 billion won. Lotte Card, which significantly expanded the issuance of corporate purchase-only cards to Homeplus despite its deteriorating payment situation, has also been named as a respondent.

Robex identifies the core issue as the "outsourcing of credit risk." After MBK Partners acquired Lotte Card in 2019, it allegedly used its affiliates to conceal Homeplus's financial crisis and shift losses onto general investors. At the time of Homeplus's acquisition in 2015, the accused parties financed 4.3 trillion won of the total 7.4 trillion won purchase price through leveraged buyout (LBO), transferring the repayment burden to Homeplus. As a result, financial costs surged, and the worsening large-scale discount store market further exacerbated the company's financial situation.

Since 2020, Homeplus has secured cash flow by entering into corporate purchase-only card agreements with Hyundai Card and Shinhan Card, paying suppliers by card first and then settling with the card companies 30 to 45 days later. However, when faced with a credit rating downgrade crisis in 2022, MBK Partners used its affiliate Lotte Card to establish a new corporate purchase-only card contract. The amount spent using Lotte Card soared from about 126.4 billion won in 2023 to approximately 795.3 billion won in 2024, a more than sixfold increase, which is seen as an abnormal expansion of credit extension.

Robex further points out that, in the process of securitizing card receivables, an unusual "participation contract" was employed instead of the standard "assignment of receivables" method. This participation contract, which only securitizes cash flow, is alleged to have circumvented regulations under the Lending Business Act and the Asset-Backed Securitization Act.

Kidong Kim, Managing Partner at Robex, stated, "It is clearly revealed in the accounting firm's investigation report that Homeplus has been in a liquidity crisis for several years and resorted to ABSTB and short-term CP for ultra-short-term funding to avoid default. Separate from the court's rehabilitation proceedings, civil and criminal legal action against MBK and Homeplus management must proceed swiftly and thoroughly."

This content was produced with the assistance of AI translation services.