A group of affected consumers has filed a complaint against Qoo10 CEO Ku Young-bae, as well as the CEOs and chief financial officers of the two troubled e-commerce sites, on charges of fraud, embezzlement and breach of trust.
Since early July, Tmon and WeMakePrice have been delaying payments to sellers, leading some businesses to cancel listings and withdraw from the platforms. Customers have been requesting cash refunds after payment gateway agencies suspended credit card transactions.
"Operating shopping malls despite being unable to pay settlements amounts to a Ponzi scheme," attorney Shim Jun-sup told reporters outside Gangnam Police Station in southern Seoul.
"The illegal misappropriation of funds to grow Qoo10's subsidiary Qxpress and the lax management of the companies may constitute a breach of trust or embezzlement," he said.
Ku, a Korean national, is suspected of diverting funds from Tmon and WeMakePrice to support his bid to list the logistics subsidiary Qxpress on Nasdaq.
The police station said it has assigned the case to a criminal investigation team.
Later in the day, Prosecutor General Lee One-seok directed the formation of a prosecutors’ team to investigate the incident. An official from the Seoul Central District Prosecutors' Office said the office is reviewing whether there have been any legal violations.
The main opposition Democratic Party also said it would push for a parliamentary investigation into the incident.
In the afternoon, Tmon and WeMakePrice filed for corporate rehabilitation procedures with a Seoul court.
Earlier in the morning, Ku apologized to the public and announced he would use his personal assets to address the payment crisis.
"I will sell or use as collateral the entirety of my Qoo10 shares, which constitute most of my assets, to address this situation," Ku said in his first statement since the financial problems at the two e-commerce platforms came to light last week.
"I deeply apologize to the customers affected, all of our partners and the public. We will minimize the impact on our customers and prevent the situation from spreading with a swift response," he said.
He and his company fully recognize their managerial responsibility for the incident and will mobilize all available resources at the group level, he added.
He estimated the total customer damage, mostly related to travel products, at around 50 billion won ($36.2 million).
Later in the day, the Korean government decided to spend at least 560 billion won to support affected small business owners, officials said.
The decision was made during a meeting of a government task force comprising officials from the finance, industrial, land, and culture ministries, as well as financial regulators.
