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Photo = Kakao Mobility |
[Alpha Biz= Reporter Kim Sangjin] Kakao Mobility (KaMo) faces heavy penalties from financial regulators for allegedly inflating its revenues in a bid to boost its financial standing ahead of an initial public offering (IPO). The company has been accused of engaging in fraudulent accounting practices, specifically inflating its sales and expenses.
However, the Financial Supervisory Service (FSS) had classified the violation as intentional ("willful"), while the Financial Services Commission (FSC) downgraded it to a lower level of negligence, labeling it as "gross negligence."
At a meeting on the 6th, the Securities and Futures Commission (SFC) under the FSC determined that Kakao Mobility had committed a significant oversight of its duties, leading to severe penalties. The company has been fined 3.46 billion Korean won, with Kakao Mobility's CEO, Ryu Geung-seon, and former CFO each being fined 340 million Korean won. Additionally, the CFO has been recommended for dismissal and will be suspended for six months. Furthermore, the company, CEO, and former CFO will have their case forwarded to the prosecution for further investigation.
The allegations date back to 2020-2022 when Kakao Mobility is accused of intentionally inflating its revenue by using an improper accounting method. Through its subsidiary KM Solutions, KaMo provides taxi dispatch services and receives a commission of about 20% from the fares. Simultaneously, it has a contract with the taxi services to pay about 17% of the fare as compensation for collecting operational data, leading to the effective commission paid to Kakao Mobility being only 3%. Despite this, KaMo used the "gross method" of accounting, recording the full 20% as revenue and the full 17% as expenses, thus misrepresenting the company's financial position.
Alphabiz Reporter Kim SangJin(letyou@alphabiz.co.kr)
