Startup With Fake Sales Illegally Pocketed Over 100 Million Won in Government Subsidies

Ministry of SMEs and Startups Unaware of Over 100 Million Won in Fraudulent Subsidy
Delayed Internal Investigation After Supreme Court Ruling Report
Won Kim: "Build an Inter-Agency Post-Management System"

Won-Ki Kim, member of the Democratic Party of Korea.

A startup that was convicted of issuing false tax invoices has also been found to have submitted fraudulent documents to the Korea SMEs and Startups Agency (KOSME), illegally receiving over 100 million won in government subsidies. This revelation, which emerged belatedly, has sparked controversy.

Although the Supreme Court ruling was delivered in May 2025, the Ministry of SMEs and Startups only rushed to initiate sanction procedures in mid-September, after media reports surfaced. This has led to growing criticism of the ministry's inadequate project management system.

According to the Seoul High Court ruling submitted by Assemblyman Won Kim of the Democratic Party of Korea (representing Mokpo, South Jeolla Province) on October 12, the CEO of startup A, which manufactures bio-chemical products, was found guilty of inflating sales by issuing false tax invoices totaling 9.2 billion won between 2018 and 2021. The original sentence-950 million won in fines, two years in prison, and three years of probation-was upheld.

The issue is that, during these illegal activities, the company fraudulently obtained a total of 106 million won in government support through the KOSME "Youth Startup Academy" program on two occasions. Furthermore, since its founding in 2017, the company received over 1.5 billion won in cumulative government support, including policy funds from the Ministry of SMEs and Startups and KOSME loans, yet its sales last year amounted to only about 460 million won.

Despite the Supreme Court’s final ruling in May, neither the Ministry of SMEs and Startups nor KOSME, the executing agency, was aware of the fraudulent subsidy until media reports emerged in August. After belatedly grasping the situation, the ministry convened a Business Operations Committee on September 12 and decided to ban the company from participating in government projects for three years and to recover the full amount of 159 million won.

Experts argue that, to prevent startups with a history of illegal conduct or those that have not been properly vetted from receiving government subsidies, it is essential to establish a system for cooperation with the National Tax Service during the pre-screening process, and to strengthen post-management through collaboration with the Ministry of Justice and the police, among other robust institutional measures.

Assemblyman Kim stated, "A loophole in the Ministry of SMEs and Startups’ subsidy management system has resulted in the waste of hundreds of millions of won in taxpayer money and deprived other promising startups of valuable support opportunities. During the National Assembly audit, I will question the circumstances behind the fraudulent subsidy and propose measures for building an inter-agency post-management system after policy funding is provided."

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