On the 14th, the Financial Services Commission held a regular meeting and imposed a total penalty surcharge of 1.05 billion won on Panakeia and its officials for violating accounting standards in the preparation and public disclosure of financial statements. The financial authorities periodically impose sanctions related to corporate accounting practices. Furthermore, Panakeia is not a well-known company, and the size of the penalty surcharge was not significant.
However, there were quite a few people within the authorities who were interested in this penalty surcharge case, as Panakeia is associated with the Lime Fund scandal, which caused a stir in the domestic capital market in 2019.
The former name of Panakeia, a company that produces specialized machinery, is Shupex B&F. While Panakeia may be unfamiliar, investors may recognize Shupex B&F. Shupex B&F is also the company that received a loan of $100 million (approximately 140 billion won) from Lime Asset Management in 2018, which it failed to recover while proceeding with a Cambodia resort development project financing. At that time, Lime acquired 17.08% (11,979,782 shares) of Shupex B&F's convertible bonds.
According to the investigations by the financial authorities and prosecutors, the management of Shupex B&F created a 'shell' subsidiary (Crearmotors) that was essentially inactive. This subsidiary was instructed to issue bond warrants and acquire them with the funds received from Lime. This created a structure whereby Lime's funds flowed through a subsidiary in a state of complete capital erosion directly into the pockets of Shupex B&F's management. This action continued from 2018 until the third quarter of 2019.
Despite the lack of recovery prospects, Shupex B&F falsely accounted for it as normal assets, inflating its net profit and equity by 4.9 billion won, which ultimately led to their downfall. Separately from the actions of the financial authorities, the management of Shupex B&F has been indicted for embezzlement and breach of trust and has been found guilty in the first trial.
The unscrupulousness of the companies involved with Lime Asset Management has produced numerous victims and has severely eroded trust in our capital market. Although the penalty surcharge is only 1 billion won, this is why the financial authorities have put forth their best efforts in this disciplinary action. Recently, as the climate for early elections has intensified, a chaotic atmosphere persists both inside and outside the government, but officials noted, 'Let's wrap up what needs to be done well,' as they proceeded with the sanction process.
The June 3rd presidential election is approaching. While it is still uncertain which candidate will taste victory, I can't help but think it would be nice to have a president who pays attention to block another incident like Lime and Shupex B&F. This is because, even at this moment, sophisticated and meticulous illegal activities are continuously taking place in the capital market.
Currently, even just the 'suspicious' theme stocks that the authorities feel the need to investigate amount to over 70. The problem is that accurately diagnosing each theme stock requires about 200 days, but the number of personnel available for this task, including the Financial Services Commission, Financial Supervisory Service, and Korea Exchange, is woefully inadequate. The consequences of poor management and supervision will inevitably fall directly on individual investors.