[Edaily Marketin JI YEONG-EUI YunJi Kim Soyoung Park Reporters] On the afternoon of January 25, 2022, a massive sum of 5 billion won was deposited into the account of “Cash Cow,” a receipt rewards service provider. The funds were sent by ISTN, which was in negotiations to acquire Cash Cow’s core business. However, at the time, Cash Cow’s shareholders had not yet agreed to the sale, and the main contract for the business transfer had not even been signed.

The funds, deposited unexpectedly without following formal procedures, were soon withdrawn from the company’s account under suspicious circumstances. Between 3:37 p.m. and 3:40 p.m. on the day of the deposit—a span of just three minutes—a total of 2.2069 billion won was transferred in five separate transactions from Cash Cow’s account to the personal account of CEO Seol Mo. The following day, approximately 2 billion won flowed back to ISTN, the company that had originally deposited the funds.

This means that approximately 4.2 billion won—more than 80 percent of the 5 billion won in business sale proceeds received without shareholder consent—was used in just two days to repay the CEO’s personal debts and return investment funds to a specific investor. Cash Cow shareholders filed a criminal complaint against CEO Seol for breach of trust and embezzlement, alleging “illegal transactions,” thereby initiating a legal battle. The Cash Cow breach of trust and embezzlement case has now been referred to the prosecution, where an investigation is underway.

CashCow, Which Had Planned to Go Public Within a Few Years, Suddenly Pursues a Business Sale

To understand the background behind the suspicious movement of 5 billion won, we must first examine how CashCow’s growth strategy abruptly shifted from an initial public offering (IPO) to

a

business

sale

. CashCow had initially presented a vision to its shareholders to raise its corporate value by attracting external investment and then list on the stock market. At the 2019 shareholders’ meeting, CEO Seol explained the status of attracting strategic investors (SIs), such as BSG Partners, and expressed his intention to pursue an IPO around 2021; he reiterated this listing plan at the 2021 shareholders’ meeting as well. CEO Seol’s statements regarding the IPO are documented in the audio recordings of the shareholders’ meetings.

However, as the company’s management structure changed, its listing plans also faltered. Those who had co-managed the company since the days of E&B Soft—the predecessor to Cash Cow—were excluded from management, and conflicts deepened starting in 2021 as CEO Seol began making independent operational decisions based on his authority as CEO. The shareholders who filed a complaint against CEO Seol claim that the company’s financial situation also deteriorated around this time. In fact, when the disputed 5 billion won was received in January 2022, Cash Cow was already in a state of negative equity. It was determined that, as of 2021, the company had recorded a loss of 3.86 billion won.

Furthermore, contrary to the promise of an IPO that had been publicly stated for years, CEO Seol began pushing to sell off Cash Cow’s core business. Starting in 2021, CEO Seol pursued a business transfer to transfer Cash Cow’s core business rights to ISTN. ISTN was already a major investor that had invested approximately 2 billion won in Cash Cow and held redeemable convertible preferred shares (RCPS). At the time, the sale price for the business rights, discussed behind the scenes under CEO Seol’s leadership, was estimated to be between 10 billion and 13 billion won.

The existing co-management team and some shareholders immediately objected. They argued that the valuation was excessively low compared to the company’s value recognized during previous funding rounds and the growth projections presented on the premise of an IPO. In early 2022, CEO Seol set out to persuade shareholders by offering approximately 13 billion won as the consideration for the business transfer. During this process, allegations were submitted to investigative authorities that CEO Seol had proposed to certain shareholders that he would pay them a “certain sum” in exchange for their agreement to secure the consent of other shareholders.

Amid fierce opposition from shareholders, the funds began to arrive. On January 25, 2022, ISTN made an advance payment of 5 billion won to Cash Cow as a down payment. Based on a synthesis of materials provided by the complainants and statements made by CEO Seol to investigative authorities, it appears that the two companies discussed a structure whereby this money would be applied toward the purchase price if a business transfer agreement were eventually signed, and would be returned to ISTN if the transaction ultimately fell through. The business had not yet been sold, nor had the sale price been finalized. From Cash Cow’s perspective, while it had secured 5 billion won in cash, it was also money that would have to be repaid in full if the deal fell through. In other words, it was funds that were recorded as liabilities on the company’s books and were subject to a custody obligation.

Leaving the company with a 5 billion won debt... CEO Seol and a specific investor recouped funds

CEO Seol is under suspicion of arbitrarily using that money, which was classified as a “liability” subject to a repayment obligation. On the very day the 5 billion won was deposited, 2.2069 billion won was transferred from Cash Cow’s account to CEO Seol’s personal account. The plaintiffs claim that a significant portion of this amount was used to repay personal debts that CEO Seol owed to Cash Cow. They point out that the CEO recovered his own debts immediately after the company assumed the burden of repaying the 5 billion won to external parties. If the business transfer had been properly completed and the company had received the sale proceeds, the use of those funds could have been largely recognized as falling within the realm of business judgment. However, at that time, not only had no resolution been passed at the shareholders’ meeting, but the main business transfer agreement had not even been signed.

It is understood that during the police investigation, CEO Seol stated that he did not take the money for personal use, but rather that it temporarily passed through his account to be deposited where ISTN had requested during the business transfer negotiations. However, the shareholders’ claims differ. They argue that nowhere in the agreements or contracts related to the business transfer was there any provision stating that CEO Seol’s personal account would be used as an escrow account. In fact, it is believed that a portion of the funds was subsequently used, via another corporation, for CEO Seol to purchase ISTN shares.

The day after approximately 2.2 billion won was transferred out of CEO Seol’s personal account (January 26), another 2 billion won was withdrawn from the Cash Cow account and transferred to ISTN. Shareholders view this transfer as Cash Cow returning the original investment principal under the pretense of redeeming the Redeemable Convertible Preferred Shares (RCPS) in which ISTN had invested. At the time, ISTN was not only a major investor in Cash Cow but was also in the process of acquiring its core business. Just one day after transferring 5 billion won under the guise of business sale proceeds, ISTN effectively recovered the 2 billion won it had previously invested.

Furthermore, the RCPS redemption appears not to have followed legal procedures. According to Cash Cow’s articles of incorporation, the redemption of preferred shares was permitted only when the company had distributable profits, and upon receiving a redemption request, the company was required to notify preferred shareholders of △ the fact of the redemption request and △ the number of shares and amount eligible for redemption.

The police, who launched an investigation into the Cash Cow allegations, determined that there were potential legal violations in the act of imposing a 5 billion won burden on the company and in the subsequent handling of the funds. The police determined that if Cash Cow—despite being in a state of negative equity at the time—received 5 billion won before the main contract was signed, thereby incurring a repayment obligation, and then used that money primarily as the CEO saw fit—such as to repay personal debts and support ISTN’s recovery of investment funds—this could constitute breach of fiduciary duty, causing harm to the company while benefiting the CEO. The police, after comprehensively reviewing all relevant circumstances regarding the company’s subsequent use of funds, referred the case to the prosecution on charges of breach of trust and embezzlement.

CEO Seol first denied the premise that the 5 billion won sent by ISTN was a down payment for a business transfer agreement. CEO Seol explained, “At the time, the business transfer agreement had not been signed; we were still in the stage of continuing discussions at the level of a Memorandum of Understanding (MOU).” He added, “Due to the company’s financial difficulties caused by the COVID-19 pandemic, the funds were in the nature of financial assistance provided by ISTN, which was an existing shareholder. Since 5 billion won was mistakenly deposited in a large amount, we immediately returned 2 billion won the next day, so the funds that actually entered the company amounted to 3 billion won.”

Regarding the fact that approximately 2.2 billion won of the 5 billion won was transferred to his personal account, he explained that it was the repayment of a loan he had extended to the company. CEO Seol said, “Since I owed the company such a large amount, I accounted for it as a repayment using the ISTN funds,” adding, “I did not use the money personally; I placed it in an external escrow account. Later, when discussions regarding the business transfer fell through, I returned the funds to the company and subsequently returned them to ISTN.”

He also denied the claim that 2 billion won was used to redeem ISTN’s Redeemable Convertible Preferred Shares (RCPS). CEO Seol countered, “There is no fact that ISTN’s preferred shares were redeemed, and ISTN remains a shareholder to this day,” adding, “At the time, the company was operating at a loss and could not have met the requirements for preferred share redemption (i.e., the ability to pay dividends) in the first place.”

However, ISTN’s position differed from that of Cash Cow. ISTN maintained that the “5 billion won” deposited into Cash Cow’s account was clearly a down payment. ISTN’s management stated, “We did have the intention of acquiring Cash Cow to try to turn it around. So, we entered into a comprehensive business transfer agreement and paid 5 billion won as a down payment, but the situation did not allow for a comprehensive transfer (of the business). “Because negotiations with the shareholders didn’t go well, we got the entire amount back,” they said, adding, “We had no further relationship after the deal fell through. We wrote off the entire investment in Cash Cow as a loss.”

He continued, “Even when I went to the police as a witness (in connection with the breach of trust case), I acknowledged that I had given and then received the money, and since that matter was fully resolved, there were no further issues afterward.”

A Promising Company Plunged into Capital Erosion… 5 Billion Won in Breach of Fiduciary Duty and ‘Suspicious Transactions’

CashCow was once a company on a rapid growth trajectory, attracting funds from outside investors. Its business model—collecting supermarket receipts from customers in exchange for rewards to gather purchase data—clearly resonated with the public. This was one of the factors that enabled the company to attract strategic investors such as BSG Partners, Shinhan Capital, and ISTN, securing a cumulative equity investment of approximately 4 billion won. In addition to the receipt rewards business, there are indications that the company was discussing collaborations with large corporations, such as Company E, based on customer purchase data. It also appears there was a clear plan to go public to gain additional momentum for growth.

A closer look at how this cash cow—which seemed poised for smooth growth—fell into capital erosion reveals several suspicious transactions. There were other transactions shrouded in suspicion besides the alleged 5 billion won breach of trust. As shareholders and former executives tracked the flow of funds between the company’s accounts and external entities , they discovered a series of tax invoices and transaction records with unclear grounds for actual expenditures. Numerous instances were also identified where the transaction amount was set first, followed by the contract details being finalized later, or where contracts were drafted only after tax invoices had been issued.

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