[Edaily Marketin JI YEONG-EUI Reporter] “There’s never been a better time for scammers looking to siphon off investment funds. The government is pouring huge sums into the National Growth Fund. Are there really that many companies worth investing in right now? No, there aren’t. If we place too much emphasis on the speed of investment, fraudulent companies will be rejoicing.”

This is a concern recently raised by a private equity fund (PEF) industry insider regarding the National Growth Fund. While the intent to supply large-scale growth capital to high-tech industries is understood, critics point out that if the capacity to vet investee companies cannot keep pace with the speed at which funds are injected into the market, troubled or fraudulent companies could end up benefiting from these policy funds. In other words, funds that should be directed toward growth companies in desperate need of capital could end up in the pockets of fraudsters who have manipulated their financial statements to appear as if they are sound businesses.

According to the investment banking (IB) industry on the 26th, the Financial Services Commission (FSC) plans to supply 150 trillion won to the high-tech industry ecosystem over the next five years through the National Growth Fund. This year’s funding target alone amounts to 30.6 trillion won. As of the end of July, the FSC had approved a total of 23 projects worth 16.3 trillion won, with 4.1 trillion won actually disbursed. In the indirect investment sector, which operates through private asset managers, 18 asset management firms have been selected, and efforts to establish funds are gaining momentum.

The FSC maintains that, in order to respond flexibly to companies’ funding needs, it is important to approve support quickly, ahead of when it is actually needed. It also announced its policy to actively review eligible companies without being constrained by the annual target of 30 trillion won. The FSC explains that by combining direct investment, infrastructure investment and financing, and low-interest loans, the pace of fund disbursement is faster than that of past policy-driven funds.

Funding Has Increased… But Have the Number of Investable Companies Kept Pace

? The problem is that even if the supply of policy funds is significantly increased, the number

of

high-quality

companies

worthy of investment does not necessarily grow at the same rate. Of this year’s target supply of 30.6 trillion won, indirect investments—for which private managers such as private equity (PE) and venture capital (VC) firms must identify investment targets themselves—account for 7.6 trillion won alone. This figure combines public participation funds (1.2 trillion won) and general policy funds (6.4 trillion won).

The investment industry is particularly wary of an excessive “race against time” that could unfold during this process. Asset managers entrusted with policy funds must identify investment targets and commit the funds within a specified timeframe. The Financial Services Commission also suggests that the typical investment period for existing policy funds is around 4 to 5 years. While the amount of funds that must be disbursed within the deadline has increased significantly, it is difficult to expand the pool of target companies or the review personnel needed to vet them in the short term. This has led to concerns that as the pace of execution accelerates, the time and depth devoted to due diligence for individual companies may become inadequate.

In particular, unlike publicly traded companies, information available externally on unlisted growth companies is limited. If due diligence is limited to merely verifying audited financial statements, contracts, and sales data submitted by the company, it becomes difficult for investors to detect if the documents themselves have been forged or distorted. This is why a rigorous due diligence process—which involves directly confirming the existence of actual transactions with major business partners and cross-checking tax invoices and cash flows—is essential.

"If the National Growth Fund Prioritizes Investment Speed, 'Fraud Verification' Will Suffer"

The recent “As We Make” fraud scandal is a prime example of the limitations of investment verification. AsWeMake, the operator of “QMarket,” a food ingredient ordering and delivery platform, is a company that grew by attracting more than 20 investors, including private investment partnerships and venture capital (VC) firms. However, during the process of securing a large follow-on investment, irregularities in sales and financial data were discovered belatedly. In the first half of this year, As We Make pursued a plan to raise a total of 70 billion won in new funds through redeemable convertible preferred shares (RCPS). At the time, the company’s stated valuation was 150 billion won pre-investment and 220 billion won post-investment. The plan also included an exit strategy to file for an IPO in the second half of 2027 and complete its stock market debut by the end of 2028.

Judging solely by the figures in the investment proposal, As We Make was experiencing rapid growth. According to the materials As We Make presented to investors, revenue—which had totaled just 3.6 billion won in 2023—was projected to increase to 43 billion won in 2025 on a consolidated basis across its affiliates. The earnings forecasts, which incorporated the investment firm’s views, also showed a sharp increase, projecting revenue of 146.7 billion won in 2026 and 295.7 billion won in 2027. Applying the average price-to-earnings ratio (PER) of comparable companies to the projected net income of 39.5 billion won for 2027, the firm even estimated that the company’s enterprise value would exceed 1.2 trillion won.

As We Make already had numerous venture capital firms and investment funds listed as major shareholders. However, as investors reviewing a 70 billion won follow-on funding round conducted preliminary due diligence, irregularities were detected across the board in the quantitative data forming the basis for investment decisions—including business partners, revenue, and bank balances. Evidence emerged that the figures provided by As We Make did not match the actual business relationships with some clients, and it was also discovered that the audit-related documents provided to investors differed from the originals issued by the accounting firm. Consequently, the investment firms have completely halted further investment and have initiated an external accounting audit and legal action.

Had the investors not scrutinized the company properly—given the presence of multiple investors and the company’s seemingly solid financial performance—the signs of manipulation might have gone unnoticed. This is why the investment industry is paying close attention to the As We Make case as the National Growth Fund begins to actively disburse funds. This year alone, indirect investments through private asset managers—such as PE and VC firms—total 7.6 trillion won. Critics point out that as the volume of investment reviews rapidly increases, similar problems could recur if asset managers rely too heavily on existing investors’ judgments or past fundraising records and thereby reduce due diligence procedures for individual companies.

If the National Growth Fund manages its funds too conservatively and fails to supply capital to the growth companies that actually need it, it will be difficult to achieve the policy objectives. However, if the number of investment deals and due diligence tasks surge rapidly as the scale of funding expands, there is a risk of insufficient time and manpower to conduct thorough due diligence on individual companies. In particular, from the perspective of asset managers—who must align investment timeframes and disbursement plans for each fund—the pressure to identify investment opportunities and exhaust the fund’s capital may increase simultaneously as time goes on.

An investment industry official stated, “If the number of deals increases while the investment period remains fixed, each analyst will inevitably have to review a larger number of cases simultaneously.” He added, “This could lead to situations where analysts brush things off, thinking, ‘It’s fine since we already have existing investors.’ This creates a prime opportunity for fraudsters who merely manipulate financial figures to embezzle investment funds.”

The official continued, “No matter how much investment firms strengthen their due diligence, it is difficult for the private sector alone to prevent all cases where individuals intentionally manipulate data to secure investment funds,” and pointed out, “The judicial response system must also be strengthened to ensure that detected investment fraud is investigated swiftly and punished severely.”