Koo Bon-hyun, 'Third-Generation Member of the Wider LG Family,' Arrested After 8 Years on the Run Over Alleged 14.5 Billion Won in Illicit Gains

[Financial News] Koo Bon-hyun, the former CEO of EXA E&C and a 'third-generation member of the wider LG family,' has been arrested after eight years on the run abroad. He is suspected of acquiring a KOSDAQ-listed company effectively without using his own capital, driving up its share price through false, favorable disclosures, and making illicit gains worth 14.5 billion won by selling shares held under borrowed names.
On the 13th, the Financial Crime Investigation Unit of the Metropolitan Investigation Unit at the Seoul Metropolitan Police Agency said it had arrested Koo and was investigating him on suspicion of fraudulent unfair trading under the Capital Markets Act and embezzlement and breach of trust under the Act on the Aggravated Punishment, etc. of Specific Economic Crimes.
According to police, Koo and his associates allegedly acquired KOSDAQ-listed companies without using their own capital from February 2016 to December 2017, financing the purchases with borrowed funds, including stock-backed loans, and then raising money by issuing convertible bonds (CBs), bonds with warrants (BWs), and other securities.
Investigators found that while acquiring stakes in unlisted companies with strong business prospects, Koo disclosed the acquisition funds as if they were his own capital and concealed facts such as his ownership of shares under borrowed names and the pledging of shares as collateral. Police believe that after favorable disclosures drove up share prices, Koo's associates sold shares held under borrowed names, making about 14.5 billion won in illicit gains.
Koo is also suspected of embezzling about 4.6 billion won by using cash assets of affiliates of companies he acquired for entertainment expenses and other purposes, or by creating fictitious consulting contracts. He also faces allegations of causing losses of about 12.3 billion won by lending funds from related companies without collateral or arbitrarily pledging company-owned shares as collateral.
Koo left for the Netherlands in October 2018 while financial authorities were investigating. An arrest warrant was issued around May 2019, followed by an International Criminal Police Organization Red Notice and the invalidation of his passport.
On August 25, Koo was arrested after local police in Cambodia confirmed he was the subject of a Red Notice during an identity check. He was repatriated to South Korea and arrested on the 9th, and a court ordered his detention on the 11th.
Koo is reportedly admitting to the allegations overall. However, he denies his accomplices' statements that he was the mastermind who alone directed the entire scheme.

Koo is the son of Koo Ja-geuk, former chairman of EXA E&C and the youngest brother of Koo Ja-kyung, honorary chairman of LG Group. He was previously indicted on allegations including driving up share prices to make illicit gains during the acquisition of a company specializing in new materials, and the Supreme Court upheld a three-year prison sentence in 2012.
The prosecution's investigation into this case was suspended after Koo fled overseas, and the case was transferred to police following an amendment to the Criminal Procedure Act. Police are also reviewing whether to seek a pre-indictment order to preserve assets for forfeiture of illicit gains worth 14.5 billion won after identifying Koo's assets.
Police also said the system for sharing information in investigations of unfair trading in capital markets needs to be improved in light of this case. A police official said, "Institutional changes are needed so that police can also promptly receive information obtained by financial authorities in cases of unfair trading in capital markets." The official added, "At present, relevant information is routed only through the Public Prosecution Office, making it difficult for police to obtain case information at an early stage."
Police plan to refer Koo's case to the Public Prosecution Office as soon as they complete further questioning.
[email protected] Choi Seung-han Reporter