[Edaily Reporter KIM SAE-MI ] Although Genencell was an unlisted company, it was a biotech firm that attracted significant funding at the time by riding the “COVID-19 treatment” trend. In particular, when tracking management control, convertible bonds (CBs), and existing share transactions involving Gold Pacific (currently KBIO COMPANY(038530)) and SEJONG MEDICAL Co.Ltd.,(258830)—both KOSDAQ-listed companies linked to GenenCell—certain merger and acquisition (M&A) and mezzanine investors repeatedly emerge. Some of these individuals are known in the market as so-called “insiders.”

According to a comprehensive report by E-Daily on the 11th, the financial and personnel networks of Gold Pacific and SEJONG MEDICAL Co.Ltd. overlapped on multiple occasions in connection with the natural-product-based COVID-19 treatment business led by Kang Se-chan, founder of GenenCell and former professor at Kyung Hee University. In the biotech industry, the prevailing view is that these investors were attempting to ride the wave of the “COVID-19 treatment theme”—which was driving the stock market at the time—rather than focusing on the technical value of the COVID-19 treatment candidates “ES16001” or “APRG64.”

Investors Linking Gold Pacific and SEJONG MEDICAL Co.Ltd.: “Kang Se-chan’s COVID-19 Treatments”

The clearest link is Lee Jae-cheol, CEO of Time Investment. After acquiring Gold Pacific’s convertible bonds (CBs) in September 2020, Time Investment exercised its conversion rights to secure a 6.46% stake. At the time, Mr. Lee served as the CEO and was the largest shareholder, holding 100% of the company’s shares, making it effectively his personal company.

About 10 months later, in July 2021, Time Investment moved to acquire management control of SEJONG MEDICAL Co.Ltd., and in August of the same year, it became the largest shareholder by securing a 16.67% stake through the acquisition of new shares. In effect, the entity that had invested in Gold Pacific went on to acquire control of SEJONG MEDICAL Co.Ltd., which became the largest shareholder of GenenCell the following year.

CEO Lee was appointed as a co-CEO on September 3, 2021, immediately following the acquisition of management control of SEJONG MEDICAL Co.Ltd. Subsequently, in the same month, SEJONG MEDICAL Co.Ltd. issued mezzanine securities totaling 30 billion won, including 20 billion won in convertible bonds (CB) and 10 billion won in bonds with warrants (BW). Subsequently, on October 19, he purchased 660,000 existing shares of GenenCell held by former Kyung Hee University professor Kang Se-chan for approximately 6.3 billion won and acquired an additional 5 billion won worth of GenenCell convertible bonds, investing a total of 11.3 billion won to become GenenCell’s largest shareholder. A week later, on the 26th of the same month, the Ministry of Food and Drug Safety approved GenenCell’s Investigational New Drug (IND) application for Phase 2 and 3 clinical trials in Korea of its COVID-19 treatment candidate, “ES16001.”

CEO Lee’s tenure as the controlling shareholder of SEJONG MEDICAL Co.Ltd. was short-lived. Time Investment subsequently changed its name to SEJONG MEDICAL Co.Ltd., and in July 2022, CEO Lee signed an agreement to transfer a portion of his stake in SEJONG MEDICAL Co.Ltd. to Canary Bio M, resulting in a change of management control. In September of the same year, Canary Bio M became the largest shareholder of SEJONG MEDICAL Co.Ltd., and management control shifted to Canary Bio. This occurred approximately one year after CEO Lee’s group had acquired management control of SEJONG MEDICAL Co.Ltd.

Yoo Cheol-woo, CEO of Balancers, is also a key figure linking the two companies. According to a Gold Pacific disclosure, YOO ANDY C held 100% of Balancers—which was the largest shareholder at the time—in 2018, and he also served as an inside director of Gold Pacific and CEO of its Australian subsidiary. A separate 2022 disclosure by a listed company specifies that YOO ANDY C’s Korean name is “Yoo Cheol-woo.” In other words, CEO Yoo was a key figure on the side of Gold Pacific’s controlling shareholders in the past.

CEO Yoo reappeared during the 2021 acquisition of existing shares in SEJONG MEDICAL Co.Ltd. “ANDY YOO” is listed on the roster of members of the MOB Consortium, which acquired the existing shares of SEJONG MEDICAL Co.Ltd., while “Yoo Cheol-woo” is listed as a member of New Hara No. 19 Investment Consortium, another acquiring entity. Both individuals share the same date of birth—February 19, 1979—and their nationalities and addresses also match. Considering that another public disclosure by a listed company identifies YOO ANDY C’s Korean name as Yoo Cheol-woo, there is substantial evidence to suggest they are the same person.

Different Fund Names, Same Investor… A Suspicious Overlap

Certain individuals also appear repeatedly throughout the process of acquiring management control of SEJONG MEDICAL Co.Ltd. Jeong Hyun-guk, SEJONG MEDICAL Co.Ltd.’s former largest shareholder, along with four others, transferred management control to Time Investment and sold their shares to four investment funds: the MOB Consortium, Masa New Technology Fund No. 44, the BMC Consortium, and New Hara No. 19.

On the surface, Time Investment and the four investment funds appear to be distinct investors. However, the story changes when examining the list of individuals who provided capital to each fund. This is because when SEJONG MEDICAL Co.Ltd. issued convertible bonds (CBs) a month later, key investors previously linked to MOB and Masa No. 44—not just Time Investment—reappeared all at once in H-Bio Fund No. 1, which acquired the bonds.

For example, the largest investor in Masa No. 44 is Esmir, which is a privately held company wholly owned by CEO Mok Hyun-soo. Similarly, Nitee, the largest investor in MOB, was also wholly owned by its CEO, Ahn Dong-jin. Both CEO Mok and CEO Ahn reappear as members of H-Bio Fund 1. In other words, investors who had purchased existing shares of SEJONG MEDICAL Co.Ltd. through different funds one month earlier jointly purchased SEJONG MEDICAL Co.Ltd.’s convertible bonds (CBs) through the same fund.

Gold Pacific’s network was also confirmed within the BMC Consortium. The list of consortium members included Byron, which had secured a 7.1% stake through a past investment in Gold Pacific’s convertible bonds; Shin Hee-jung, a former inside director at Gold Pacific; and Chairman Namgung Gyeon, known as a “major player in the KOSDAQ M&A market.” In effect, Gold Pacific investors and former executives reunited the following year in the same investment consortium that acquired existing shares of SEJONG MEDICAL Co.Ltd.

Notably, Chairman Namgung’s allocated share increased at the very time Byron reduced part of its investment in BMC. The public disclosure confirms that this went beyond the two parties simply participating in the same fund; rather, Chairman Namgung acquired an additional portion of the shares that Byron had reduced.

The connection between Chairman Namgung and Gold Pacific subsequently became even more direct. In December 2021, after BMC divested its investment in SEJONG MEDICAL Co.Ltd., MiraeING and Fantagio Corp.—both controlled by Namgung Gyeon—acquired 49.43% and 43.49%, respectively, of the shares in K&T Private Equity Fund No. 1, the largest shareholder of Gold Pacific. The combined stake of the two companies reached 92.92%. However, this transaction took place after Chairman Namgung’s investment in BMC. Therefore, Chairman Namgung did not control Gold Pacific from the time of the SEJONG MEDICAL Co.Ltd. investment.

IND Approval on the 26th → Massive Sell-off on the 27th–28th… A Coincidental “Exit” Timing

The

timing

of these investment funds’ exits is also coincidental. On October 26, 2021, when the Ministry of Food and Drug Safety approved Genencell’s Phase 2/3 clinical trial for a COVID-19 treatment, Newhara No. 19 began distributing a portion of SEJONG MEDICAL Co.Ltd.’s shares as an in-kind distribution; the following day, it distributed the remaining shares in full, liquidating the fund’s assets. MOB, Masa No. 44, and BMC sold off a large portion of their holdings on the open market on the 27th and 28th.

The mere fact that shares were sold immediately after IND approval does not necessarily prove the use of insider information or prior collusion. However, given that evidence has emerged showing that individuals close to former Professor Kang recommended buying SEJONG MEDICAL Co.Ltd. shares just before approval and discussed the “timing to sell” after approval, it is puzzling that the existing financial investors (FIs) also collectively liquidated their holdings immediately after approval.

Furthermore, based solely on the disclosures currently available, it cannot be concluded that they acted as a single group. However, it has been confirmed through public filings that some investors and executives who were previously involved with Gold Pacific have reunited in SEJONG MEDICAL Co.Ltd.’s management control, existing shares, and convertible bond (CB) transactions, and that key investors from different FIs have overlapped in another investment fund.

A financial investment industry insider stated, “Typically, in deals like this, rather than multiple funds entering simultaneously with no prior connection, key investors first review the target company and establish a basic structure, after which peripheral capital follows in the form of investment funds.” The insider added, “If the same individuals repeatedly appear across multiple transactions even in the publicly disclosed list of fund members, it seems necessary to verify whether this is merely a coincidence.”

Meanwhile, GenenCell is a company that has recently come back into the spotlight due to its connection to allegations that Kim Seung-won, the nominee for Minister of Justice, solicited favors regarding the clinical approval of a COVID-19 treatment. Allegations of preferential treatment arose after it was belatedly revealed that in 2021, at the request of an acquaintance, Nominee Kim contacted Kim Kang-rip, then Commissioner of the Ministry of Food and Drug Safety, asking him to expedite the review of Genensell’s clinical trial application.