THE MAN behind Marvelstone Group - which calls itself a fintech group - is being sued in his home country of South Korea for allegedly failing to pay contractually promised returns to investors.
Joe Cho Seunghyun, a Singapore permanent resident known in Singapore's fintech scene, is also being sued by Hong Leong Holdings for breaching a licence agreement for the now-defunct Singapore fintech hub, Lattice80. The Singapore property group charged that Mr Cho and the fintech group failed to deposit revenue receipts that should have gone into designated bank accounts.
The Business Times reviewed more than 80 pages of documents filed in South Korea and Singapore relating to the Marvelstone Group for this report.
In response to BT's queries over the lawsuits in South Korea, Marvelstone Group said the claims are "untrue", adding: "There are disputes which are currently being handled by the solicitors of the various parties in Seoul."
Despite repeated requests for documents showing Mr Cho's legal defence against these claims, Mr Cho and Marvelstone Group declined comment, beyond saying that the group in itself is not a party to these "disputes".
Marvelstone Group told BT it did not use any of the funds arising from the investments in South Korea to expand its business in Singapore.
It further said that because the group itself is not a party to the "disputes", there had been "no need" for it to disclose these cases to Singapore regulators. Mr Cho is the chairman and founder of Marvelstone Group.
In one disputed case, a South Korean investor Chun Yong Beom said he signed away 225.66 million won, or just over S$250,000, to Marvelstone Partners in 2015. Legal documents showed that Marvelstone Partners' CEO was Mr Cho, whom Mr Chun knew from university.
Marvelstone Partners had guaranteed a 33 per cent interest per annum on the capital invested by Mr Chun, a notarised contract signed off by Mr Cho showed, with the funds meant to go into another project that was later listed. The contract further guaranteed a profit on exit.
Mr Chun, who works in the financial industry, claimed that his guaranteed return due end-March 2018 never arrived, with Mr Chun questioning fund redemptions from Marvelstone Partners since 2017. Mr Chun detailed these claims in a lawsuit that he filed with another investor against Mr Cho in 2018.
Mr Chun had also filed a police report against Mr Cho in South Korea in 2018, according to messages sent by the South Korean police to Mr Chun, as seen by BT. A Singapore police spokesman told BT it will "provide the necessary assistance and support to the South Korean authorities in accordance with our laws".
South Korean court documents show that Mr Chun's case has been temporarily put on hold, with Mr Chun saying that it is because Mr Cho has not filed a counterclaim with the South Korean court. Marvelstone Group confirmed that Mr Cho has not been to South Korea this year.
Mr Chun is not the first to allege missed payments from investments in funds linked to Mr Cho. In July 2017, a lawyer for six South Korean investors sent a letter to Mr Cho to ask why redemptions from a separate fund sold by Marvelstone Ltd had been delayed for at least a year and a half.
The investors claimed in their legal demand that the fund was sold to them as a stable financial product. The 2013 prospectus for this fund said it was "conservative" and "stable", though to be sure, it said there was no guarantee that returns could be generated daily. The fund's performance return stood at about 40 per cent in 2012, the last available full year at that point.
The prospectus listed Mr Cho and his Singaporean wife Gina Heng as directors of Marvelstone Ltd, with their emails then using the domain name of "marvelstonegroup.com".
BT found a Facebook group in South Korea with more than 100 members, claiming themselves as "victims" of Mr Cho. Emails from investors and screenshots of Facebook posts reviewed by BT show ongoing investigations by South Korean regulators and lawsuits launched.
The claims of failure to pay out promised investment returns came as Marvelstone expanded into Singapore.
Ten days before Mr Chun's investment in Marvelstone Partners was notarised by a law firm in South Korea in 2015, Mr Cho sent an email to the media, listing plans that included acquisitions of global financial institutions. He said he wanted to "develop" pension funds in Singapore. He said he wanted investors here to "retire safely", and he wanted to be "the world's first fintech-driven financial group".
The group's Marvelstone Tech said in 2016 that it had raised about US$12 million in seed funding. As Marvelstone Group said it did not use any of the funds arising from the investments in South Korea to expand its business in Singapore, BT asked for details behind its funding in Singapore, including the identity of any angel investors. Marvelstone Group declined comment.
This comes as at least one funding plan had been cancelled, checks by BT showed. In July 2015, Marvelstone announced plans to raise a Singapore-based fund with Singapore-based venture capital firm Life.Sreda. But the idea did not take off.
Life.Sreda's partner and investment director Igor Pesin told BT: "The parties didn't find a way to collaborate due to a lack of understanding and openness."
Marvelstone Group's unaudited financial documents as at end of 2017 showed trade payables totalling S$938,751 that include hundreds of thousands due to a few Singapore-based investors. Its trade payables as at end-2017 were about double its trade receivables.
The loss-making group booked consultancy income of S$64,510 as its main revenue stream. It had a negative cashflow of S$71,828. In 2015, it told the press that it planned to incubate 10,000 startups through its accelerator, 10K Asia, in about seven years. As at end-2017, its investment in 10K Asia was S$700. At end-2016, its investment in 10K Asia was S$100.
These were the most recent financial documents available when BT obtained them on Feb 1 this year. Mr Cho and Ms Heng signed off on these documents, and confirmed to the Accounting and Corporate Regulatory Authority that the records were accurate as at June 30, 2018.
BT repeatedly asked Marvelstone Group to explain its financial standing and where the bulk of its funds went, with BT detailing the accounts that it had reviewed from publicly available records. Marvelstone Group declined comment.
As for Hong Leong, the company sued Marvelstone Group, Mr Cho and his wife in December 2017 for failing to pay for a licence fee and other associated costs tied to the operation of the fintech hub at 80 Robinson Road between Nov 1, 2016 and Dec 31, 2017.
Hong Leong claims that under the licence agreement, the fitting-out costs of about S$1.87 million was to be reimbursed to Hong Leong by monthly instalment payments from revenue that Marvelstone Group would earn from operating the fintech hub.
It said it terminated the agreement as Marvelstone Group, Mr Cho and Ms Heng had failed to deposit revenue in designated bank accounts.
The revenue was also allegedly deposited into other bank accounts, which breached obligations under the agreement.
"The licensees have, to date, only paid our clients the sum of S$440,890.95," said Hong Leong through its lawyer.
Marvelstone Group, in response to questions over this lawsuit, sent BT a copy of an interim payment demand of S$310,777.38 due April 22. Hong Leong confirmed to BT that Marvelstone Group had missed the payment deadline on April 22.
Hong Leong has further made claims against Marvelstone Group for failing to provide it with specific documents to disclose revenues they had earned in total. "The total amount of revenue earned by the defendants and payable to our clients has not been ascertained," Hong Leong told BT through its lawyer.
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