The financial authorities have determined that Kakao Mobility’s violation of accounting standards related to ‘revenue inflation’ was due to gross negligence and have decided to impose sanctions. However, as the prosecution is investigating issues like call allocation, the data from the Securities and Futures Commission (SFC) discussions will be transferred to the prosecution.
According to financial authorities, the Securities and Futures Commission, under the Financial Services Commission, is expected to decide on the final level of sanctions for Kakao Mobility’s accounting standards violation as ‘gross negligence’ at their meeting on the 6th. This conclusion comes five months after the matter was first submitted to the SFC on June 5, following discussions by the audit committee, a specialized accounting organization, in April this year.
The level of sanctions for Kakao Mobility, which had drawn significant attention, is expected to be decided as ‘gross negligence,’ a step lower than ‘intentional.’ Previously, the Financial Supervisory Service (FSS) had informed Kakao Mobility that they had violated accounting standards by inflating revenue in anticipation of a public offering, applying an ‘intentional stage 1′ level, which included a fine of approximately 9 billion won, the dismissal of the CEO, and a report to the prosecution.
From 2020 to 2023, Kakao Mobility accounted for the entire 20% commission from taxi companies or drivers as revenue, while returning 16-17% in advertising and data in kind. The FSS criticized this, suggesting that it should have applied the net method, considering the two contracts as one, and only considered 3-4% of the fare as revenue. They assessed that Kakao Mobility adopted the gross method as it prepared for a public offering, intending to inflate the revenue itself to increase the public offering price.
However, it appears that the SFC determined Kakao Mobility’s actions were not intentional during the discussion process. There was reportedly a division of opinion between intentionality and gross negligence during the audit committee’s deliberations, which is used as reference material in the SFC’s final judgment. There seemed to be insufficient evidence to prove that revenue size impacted public offering price estimation.
As the SFC concluded on gross negligence, Kakao Mobility may avoid the worst-case scenarios like a prosecution report or CEO dismissal recommendation. However, since the SFC has decided to send the discussion materials to the prosecution in the form of work information, Kakao Mobility has not fully avoided legal risks. The Seoul Southern District Prosecutors’ Office is investigating violations of fair-trade laws related to the call allocation incident, which the Fair Trade Commission reported. There is also a possibility that the prosecution could look into the revenue inflation-related accounting standards violation case upon receiving the SFC materials. If the legal risks persist, Kakao Mobility’s listing plans may also encounter obstacles.