April 26, 2024

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With startup Villy’s ex-CEO sentenced to an eight-year prison term for fraud, attention is now on the company’s major stakeholder SFC.

SFC is a solar backsheet supplier that acquired the entire stake in the fintech startup in 2017 for 11 billion won ($9.3 million). SFC is now demanding its money back from Villy’s former stakeholders -- Cornerstone E&M, Mobidays and Kcent Partners. Specifically, it wants to return the equities in exchange for cash.

A screen grab of Villy website

Industry watchers question the SFC’s intentions because the firm acquired Villy when its peer-to-peer loan platform was already falling behind in reimbursing loans. The Villy platform’s main mission is to match construction companies with retail investors who reap returns when the builders repay them with both the principal and interest. At the time of SFC’s acquisition, its delinquency rate was up to 20 percent.

The fact that the three Villy stakeholders joined SFC’s capital increase scheme to buy a combined 10 billion won stake just three months prior to the M&A deal has also sparked rumors.

In November 2017, Villy was considered one of the three largest P2P loan platforms in Korea in terms of accumulated loans.

As Villy began to face trouble, Cornerstone E&M, Mobidays and Kcent Partners agreed to buy back shares from SFC in October 2018. This came a month prior to the announcement by the Financial Supervisory Service that it had called for a probe into 20 of South Korea’s P2P loan startups.

Meanwhile, SFC is having trouble recouping the investment in Villy as pledged, as all three former stakeholders are delaying the full payment after putting it off four times. The payment is now due by September.

Last week, the Seoul Nambu District Court handed down a jail term to former Villy CEO Joo Hong-sig for embezzlement, breach of trust and fraud.

“The illegal acts have not only incurred a financial damage to many, many people, but also severely undermined the social trust of financial transactions,” the court said in its ruling.

Joo and other defendants, including Villy employees and the head of a local construction company, were accused of duping some 6,800 people into investing a combined 16.2 billion won in the P2P platform run by Villy.

The prosecution had initially sought a 12-year jail term for Joo upon the discovery that Villy had raised funds through fake real estate projects and used the money to repay loans on other deals for a period of over two years until January 2018.

SFC representatives could not be immediately reached for comment.

By Son Ji-hyoung (consnow@heraldcorp.com)