Let's get started. Today, I will talk about Q10. I will examine how CEO Koo Young-bae was able to withdraw that money and what exactly was lacking that led to this incident. Given the vastness of the events unfolding and the ripple effects continuously spreading, rather than covering every single detail, I will focus on the main points to see what was legally missing and how this gap came to exist. First, let me summarize the key story leading up to the incident. CEO Koo Young-bae was a figure of myth in e-commerce, having achieved several successes, including selling Gmarket and Q10 Japan to eBay. Now, he plans to list Q Express on NASDAQ.

However, the company that operates Q Express is a logistics company. For this logistics company to increase its corporate value, the volume of goods transported must increase. There are various ways to increase this volume, such as creating economies of scale through logistics efficiency and then lowering prices to attract more customers. Interestingly, CEO Kyu Young-bae has started to acquire struggling e-commerce companies instead of pursuing those methods. However, some peculiarities are observed here, as the number of cases where acquisitions occur without spending any money has significantly increased. This is possible, for example, when TMON or WEMAKEPRICE is acquired through equity exchange. In this case, instead of paying cash to acquire TMON and WEMAKEPRICE, Q Express offers its own shares in exchange for acquiring shares in TMON and WEMAKEPRICE, thus proceeding with an equity swap acquisition.

There is something I purchased with money, which is Interpark Commerce. They said they would acquire Yanolja for 17 billion won. However, they still owe Yanolja 160 billion won. This seems like a scam. Typically, a down payment is made, and it takes about six months for the transaction to be completely finalized. But now, we are saying we will acquire it for 17 billion won in April 2023. Now it's July 2024, so about a year and three months have passed. Even though six months have gone by, they still haven't paid the money. Yet, they are using Interpark Commerce to purchase something for 5 billion won. If you think about it, it seems strange to buy a new company without having paid the previous one. It's like I told reporter Ryu Jong-hoon that I bought a house, but I only paid the down payment, and I'm using that house as collateral.

I received it and bought a business. This doesn't make sense; isn't this a scam? That's the situation that's currently happening. The acquisition of AKM was in March. Originally, after the acquisition, it was supposed to be settled within six months, paying the full amount of 180 billion won. After that, it would be possible to use the shares of Interpark Commerce or whatever to buy AKM; it wouldn't matter. However, reporter Ryu Jong-hoon only paid the deposit for the house and took out a loan with it as collateral. This guy is not right. Anyway, the acquisition of AKM for 5 billion won was in March, right? But around the same time, in February, a comprehensive business transfer contract was signed to acquire the American shopping platform Wish for 230 billion won. This money was paid. Although I'm not sure how much has been paid out of the 230 billion won, there have been two payments totaling 25 billion won for the purpose of acquiring Wish, made to Tion, the CEO of WemaP.

The circumstances of leaving without a signature have also emerged. This feels somewhat like a deposit, around 10%. As I mentioned earlier, it's customary to pay about 10% as a deposit. So, they agreed to pay 17 billion won to Yao, but they still owe about 160 billion won, meaning they've only paid about 27 billion won, which is also just around 10%. This raises suspicions that this might just be a deposit payment. Similarly, with Wish, they mentioned that 25 billion won has slipped away, which again aligns with the typical deposit level of about 10%. It seems they only paid the deposit and haven't settled the rest, leaving doubts about the situation.

This really seems like a habitual offender's behavior. In this context, CEO Gu Young-bae was aiming for an Express listing by June, targeting a NASDAQ listing. However, the listing is not happening. From the time of acquisition, it has been a loss-making company with insufficient capital.

For a brief moment, if they had successfully raised capital through the listing, it could have been an incident that could have been covered up without anyone knowing. However, it seems that due to the listing, there was a lack of funds. Rumors began to spread in June about delays in payments to sellers. If you look at the posts that were shared in the community during that time, you'll see that on June 14th, a seller posted on Q10. They still haven't received any responses or settlements, so I'm trying to report this. Such information started to appear from June. However, up until that point, it hadn’t blown up significantly. Then, right around the time of the failed listing in June, Timo began selling gift certificates at huge discounts. These were not even gift certificates that could be used immediately; they were Happy Money certificates that could only be used a month later if you made a payment now.

We are starting to sell gift certificates, in other words, we are beginning to print money ourselves, not as a central bank or a state. It's impressive. However, starting from July 8, complaints began pouring in from sellers, stating that the settlement payment for May had still not been received. This incident started to come to light. The settlement payment for May had not arrived by July 8. Typically, we settle at the end of the month, so for example, those who sold in early May should have received their settlement by the end of June, but even the end of June's payments had not been settled. This began to surface in early July. As this news was reported in the media and complaints flooded in, WeMakePrice announced on July 11 that the settlements had not been processed due to technical issues, but suspicions continued to linger. Then, these issues...

There are companies that are well-known, particularly in the distribution sector or travel agencies. These companies usually have a good understanding of such matters. In the case of distributors, they receive money from sellers and then settle accounts later, so they are very aware of issues related to settlements. This is why distributors were the first to pull out, which happened on July 23rd. Travel agencies also understand this structure very well; they are very clear about the differences in timing between when they receive money from consumers, when the product is executed, and when the seller is settled. Because travel agencies grasp this structure accurately, they also sensed something unusual and pulled out immediately after the distributors. Then, on the following day, July 24th, the branches began to withdraw. The branches started to stop payment, and this is when the full-scale run began, with all branches starting to pull out from July 24th.

This is not right. Around that time, the branches began to stop payments. Up to this point, we have the context of how the incident occurred. After that, Happy Money stopped operations, and the card companies also halted payments. Victims went to the offices to protest, and CEO Koo Young-bae appeared in the National Assembly. These events, which we often saw in the news, unfolded in this way. 

To summarize this incident in one sentence, there are suspicions that CEO Koo Young-bae gathered all the unprofitable companies to inflate their corporate value and then attempted to go public to exit. The suspicion is that he may have used the sellers' money for this purpose. It seems reasonable to suspect this. However, at this stage, we cannot determine whether this was an intention to make a quick profit or not. We still need the results of the investigation to know whether the money was misappropriated.

You can only understand it by experiencing it yourself. Therefore, we are going to take a look at how we could use someone else's money at our own discretion and the structure behind it. Yes, this is important. First, we will examine the payment structure of e-commerce companies. When a customer pays the card company, the card company deducts its fees and then pays the money to the agency. The agency then holds onto this money until the online commerce company confirms the purchase. At that point, the agency will say to the seller, Please give the money, and then the agency pays the seller. This is the simplest structure of e-commerce. There is no commerce involved here; originally, there is no e-commerce. The places where e-commerce happens are not the direct sellers but rather the intermediaries of telecommunication sales. Let me briefly explain the difference between a telecommunication seller and a telecommunication sales intermediary.

A seller must engage in the act of selling by directly manufacturing or distributing products to be classified as a telecommunication sales operator. Since they directly manufacture and distribute products, there is a high possibility of incidents occurring here, which is why regulations are quite strict. They must report to the Fair Trade Commission or the head of the local government in charge of business sites. This telecommunication sales operator must actually utilize escrow services. This means they can receive payment without sending the goods, right? That's how it works. However, telecommunication sales operators only handle the brokerage for other telecommunication sales operators. In a way, they can be seen as merely taking a commission. Therefore, there is no need for a separate report; as long as the platform is open, customers can come here to make payments, and the card companies and banks will handle the transactions automatically. The payment will then go from the financial institution to the seller.

In this context, we opened the chapter, so we will only perform surgery on that chapter. This is the original role of e-commerce. However, as you mentioned earlier, payment needs to be processed as well. Payment processing and such cannot be handled by telecommunication sales intermediaries. It's not just about registration or reporting. In fact, Tion, Wemaep, and most domestic e-commerce companies transformed into telecommunication sales intermediaries in 2019. At that time, all commerce underwent the same transformation. However, because of the telecommunication sales intermediaries, they are not burdened with heavy responsibilities, but financial transactions and payment processing cannot take place. As a result, the emergence of secondary payment service providers occurred. The payment service we refer to is known as electronic payment processing services.

The financial transaction law applies here. So, as you mentioned, the communication sales brokerage cannot handle financial transactions like payment processing. Therefore, all these e-commerce companies register as electronic payment service providers. Since they are brokers, they cannot touch payments or transaction amounts, so they register as secondary payment agents to gain that ability. It becomes quite complicated. It’s a bit complex, but you understand, right? Originally, communication sales brokers couldn't handle money, but now, e-commerce companies become secondary payment agents because they need to handle money. However, the electronic payment service provider requires a capital of 1 billion won and a debt ratio of 200%. As long as they meet these not-so-high conditions, they can register. Once registered, all e-commerce companies can manage the money they receive, settle accounts, and process payments themselves.

So, most of the e-commerce companies that exist now are intermediaries and secondary payment service providers. Most of them have registered because otherwise, payment cannot be processed. Therefore, the current e-commerce payment structure is as follows: there is a customer who sends money to the card company. The card company pays the primary payment service provider, who then adds their service fee of about 2% to 3% and sends it to the secondary payment service provider. The secondary payment service providers we commonly know are TMON, WeMakePrice, and Coupang. This means that the secondary payment service provider settles the payment and sends it to the seller. This is how the structure has changed. So, there’s one more layer added in between. However, this has led to issues with settlement dates, which have been a significant problem lately. Looking at the settlement dates, it's quite disheartening.

Customers make real-time payments to card companies, and the card companies settle the transactions within three days according to the standard terms of the card industry. They settle on the second day after the first day. The card companies are regulated by the Specialized Credit Finance Business Act because they handle money, making trust and risk extremely important, which leads to strict regulations. Therefore, the settlement cycle is not legally mandated but is set by standard terms established within the industry, allowing transactions to occur within three days. However, since the first-tier payment companies also engage in financial transactions, they are subject to supervision by the Financial Supervisory Service and are regulated by the Specialized Credit Finance Business Act because they are involved in monetary transactions with card companies. Thus, the regulations for first-tier payment companies are very stringent. This time, the Financial Supervisory Service gathered major payment companies and discussed the issue of stopping payment cancellations for consumers.

There was a warning that infringing rights could violate the specialized financial language of credit, and they pressured us to settle with the first payment processor. This indicates that the first payment processor is subject to very tight regulations. So, was that why it was possible to issue refunds and such? That was indeed the case. However, regarding e-commerce companies, I mentioned the second payment processor, right? The essential nature of e-commerce companies is electronic commerce, but electronic commerce is regulated by the Fair Trade Commission under the Electronic Commerce Act. If we take a look at the official title of the Electronic Commerce Act, it is the Act on Consumer Protection in Electronic Commerce, which means it deals with matters related to consumer protection, not financial transactions. That makes sense. Therefore, this law places most of the responsibility on the sellers.

Most laws are designed to prevent consumers from engaging in unfavorable transactions. When we look at the situation of e-commerce companies, their main business is electronic commerce, so they are subject to regulations from the Fair Trade Commission. However, when it comes to financial settlement processes, including secondary agent payments, the Fair Trade Commission does not regulate this aspect. Additionally, e-commerce companies, being secondary agents, should naturally be under the supervision of the Financial Supervisory Service, but since their main business is electronic commerce, the regulations from the Financial Supervisory Service are not very strict. So, what does this mean? It means that they are not being regulated by the Financial Supervisory Service, nor by the Fair Trade Commission. This is the current situation. There are two very strong laws, but e-commerce companies have found themselves in a loose space between these two laws. It's quite remarkable, really. The Online Platform Act was promoted because they were aware of this gap, but at the time, the year the Online Platform Act was passed...

There was a significant controversy in the country regarding the potential reverse discrimination against domestic companies, leading to concerns that only Chinese platforms like AliExpress would be fostered. After various discussions and controversies, it ultimately fell through. Although the controversy did not prominently highlight the normal settlement cycle, there was a legislative direction that included discussions about the settlement cycle. Eventually, in the 21st National Assembly, 20 bills related to online platforms were proposed, but all were discarded due to the expiration of the term. In the 22nd National Assembly, five bills have been proposed, but they are still pending. Recently, on July 5th, a bill regarding the regulation of monopoly by online platforms and the fair transaction of sales was introduced by Democratic Party member Park Joo-min, which stipulates that the payment deadline for sales proceeds should be within 40 days, and payments made after 40 days.

In some cases, the platform operator is required to pay interest. This seems reasonable. We haven't had much discussion about the settlement cycle, but the Onpl Law was actually proposed with that intention, so it would be good to keep that in mind. However, I think there's a misunderstanding about the settlement cycle. Reducing the settlement cycle seems like an obvious step. But the important thing is that, like in the WeMakePrice incident, we must ensure that the money owed to sellers is never touched. That should be the core principle. Of course, this is money that cannot be tampered with. However, if we consider that we are keeping the settlement amount for two months in, say, a 6% CMA account, that's a huge benefit. For example, if we hold onto the sales settlement amount of 600 billion won for two months instead of paying it out immediately, that would mean 50 billion won a month, totaling 100 billion won for two months.

However, on the contrary, sellers have not received that money for two months, so if the bank charges 6% interest for those two months, it means that sellers are paying a 6% storage fee to e-commerce companies while not receiving the money they are owed. That's true. But look, even if you shorten the settlement cycle, such incentives still arise. For instance, if we reduce it to one month, they still earn 5 billion. Right? So, it's obviously necessary to structurally reduce that. However, even after the reduction, it seems that there should be a separate institution, like an escrow, where money cannot be touched structurally. Why? Because this was not made mandatory. In fact, escrow was made mandatory. Many of us have had experiences of receiving bricks while shopping online in the past, so electronic...

The law requires that communication sales operators must mandatorily subscribe to escrow services. But why didn't our team and WeMakePrice subscribe to escrow services? As I mentioned earlier, all e-commerce companies in the country have transitioned from communication sales to communication sales brokerage. The escrow obligation applies to communication sales. Therefore, e-commerce companies were not subject to that escrow obligation. Isn't this a bit of a loophole? It’s a bit difficult to call it a loophole; there was definitely a need to distinguish between communication sales and communication sales brokerage. The important question was about who would be held responsible in such cases. For instance, if a seller sent a brick, they couldn't hold the communication sales brokerage, like 11th Street, accountable. This is how the situation changed regarding the escrow obligation.

It seems that the issue arose because the obligations of communication sales intermediaries were not expanded. So, shouldn't we impose the obligation of escrow on e-commerce companies that are communication sales intermediaries? However, there is a bit of a gap here. According to the Financial Settlement Agency, the obligations for escrow apply specifically to cash payments. But these days, cash payments are not common. Let's take a look at the guidance from the Financial Settlement Agency. It states that the obligation for escrow applies to all cash transactions. However, as you mentioned in e-commerce, who pays in cash these days? Most people use credit cards or mobile payments. The situation is that when payments are made using credit cards or mobile payments, the credit card companies and their branches take on the role of escrow. Therefore, there is no urgent need to consider credit cards as requiring escrow.

There were no exemptions, so transactions such as credit card purchases, unnecessary transactions for delivery, and other non-cash transactions were not included in the mandatory escrow requirements. As a result, we clearly need to make it mandatory to include these aspects—non-cash transactions, credit card payments, unnecessary delivery transactions, online courses, and travel content—in the escrow obligations. Nowadays, since all these e-commerce loans are being purchased, this is crucial.

Additionally, there is another issue. The amendment to the Electronic Financial Transactions Act is scheduled to come into effect on September 15. That's right, the bill was passed on September 14 of last year, and there was a one-year grace period, so it will be implemented on September 15. However, when the amendment comes into effect, 50% of the funds must be held separately, and there will also be a requirement for payment guarantee insurance.

There are certain things that need to be included. If this is possible, would it be acceptable? In fact, this is somewhat lacking. The core of this amendment to the prepayment law is to prevent incidents like the Merzi Point situation. Therefore, requiring that 50% of the funds be kept separately and paid out is related to the laws governing gift certificates or means equivalent to gift certificates, which we refer to as prepaid means. If you look at it, there is an expansion of what can be considered prepaid means. The prepaid means mentioned here refer to things like Merzi Points or the Tion Cash that we have this time. These are considered prepaid means, such as Tion Cash and Happy Money gift certificates. However, what is noteworthy is that, for example, when we go to a coffee shop, they stamp our card, right? That too is considered a prepaid means.

Then, we need to regulate small business owners and single-person coffee shops. That's right. So, what is the standard we set here? When there is only one franchise, it does not apply. If the stamp from our coffee shop can be used at our coffee shop, then this is not considered a prepaid means, and you can do as you please. However, if you create a prepaid means, like those coupons with the stamp, and if you can use that coupon to purchase items at the bookstore next door or at the convenience store next door, then this is a prepaid means. Ah, that would get caught; we want to regulate that. Additionally, by selling this prepaid means, you must keep 50% of the money separately or provide a payment guarantee. This means that the amount we use to pay for goods, which accumulates in secondary e-commerce before being transferred to the seller, is separate from this amount. Ah, it's different.

It's about money. So if a consumer purchases socks and the amount spent on those socks is deposited into an e-commerce account, there is no obligation to separately store 50% of that amount, even with the implementation of the amendment to the Payment Services Act. Therefore, various discussions are currently taking place. There are calls for the mandatory use of escrow through the amendment to the Payment Services Act, stating that 50% of sellers' funds should be held in a different escrow account, and that payment guarantees should be established. However, there are still many gaps that remain unaddressed. Because of these issues, there is a lot to discuss, and I hope that this time, the legislation will be thoroughly enforced and amended so that such damages do not occur in the future. Whether it was intentional or not, when people take advantage of loopholes in the law to make money, victims are bound to emerge. I hope we can put an end to this kind of behavior.

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