Fintech founder Joe Cho 'under police probe in South Korea'

Singapore

THE founder of fintech firm Marvelstone Group - which was once based in Singapore - is now under investigation by police in his home country of South Korea over allegations of financial crimes, said a lawyer representing about 40 investors who have sued over claims of over S$6 million.

Joe Cho Seunghyun, a Singapore permanent resident who made the rounds in Singapore's fintech scene a few years ago, was picked up by the South Korean police at the airport on Aug 25, having been sent back to South Korea from Indonesia following a request submitted by the South Korean police through Interpol, said Noh Joohee, a lawyer from Soorun Asia.

Mr Cho has been detained by the authorities under a detention warrant issued by the South Korean court, Ms Noh told The Business Times.

An email sent by BT to Marvelstone's contact inbox to request for comment bounced back.

Ms Noh is representing 41 South Koreans, who have recently claimed that Mr Cho owes them a total of 5.3 billion Korean won (S$6.07 million) in investment principal. She has been working with the South Korean police and prosecutors on investigations relating to Mr Cho, she told BT via email.

This is just one of several lawsuits that Mr Cho is facing. The Business Times in May reported that Mr Cho was embroiled in legal disputes in South Korea over claims of fund redemptions that were contractually due to investors, but that were not paid. In May, Marvelstone said in response to BT queries that there are "disputes" being handled by solicitors of the "various parties" in Seoul". Mr Cho is the chairman and founder of Marvelstone Group.

In one earlier disputed case, a South Korean investor Chun Yong Beom said he signed away 225.66 million won 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, said his guaranteed return due end-March 2018 never arrived, and questioned 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 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.

South Korean court documents show that Mr Chun's case has been temporarily put on hold. Mr Chun told BT this was because Mr Cho had not filed a counterclaim with the South Korean court.

At least one fund prospectus linked to Mr Cho, as reviewed by BT, had made links as well to Singapore-based Leonie Hill Capital, which Mr Cho had set up, with funds allegedly raised by Leonie Hill Capital under an "Orange Fund".

The funds had been raised from Korean investors residing in Korea from December 2006 to as late as April 2013, legal documents seen by BT showed. The investors represented by Ms Noh have alleged that there is no evidence that the investment funds transferred to Mr Cho were sent to Leonie Hill Capital.

The current CEO of Leonie Hill Capital, Arun Kant, told BT that from the time he took over as CEO since 2014, Leonie Hill has not taken money from Korean investors. Mr Kant said he had not been aware of these dealings with Korean investors, which were before he took over as CEO.

"We had no money from Korean investors sent to our bank accounts in Singapore," Mr Kant said.

BT earlier found a Facebook group in South Korea with more than 100 members, calling themselves "victims" of Mr Cho. Emails from investors and screenshots of Facebook posts reviewed by BT showed ongoing investigations by South Korean regulators and lawsuits launched.

The claims of failure to pay out promised investment returns by some investors 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 Singapore 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".

Loss-making

In 2016, Marvelstone Group opened a "not-for-profit" fintech hub Lattice80 in Singapore, with then-deputy prime minister and Monetary Authority of Singapore (MAS) chairman Tharman Shanmugaratnam as guest of honour.

Marvelstone Group said then that the group had been "working closely with MAS". But an MAS spokesman told BT in May that "in line with MAS' support for initiatives that help the growing fintech community, MAS agreed to its request for MAS chairman, then-DPM Tharman Shanmugaratnam, to be the guest of honour at the launch of Lattice80".

"Apart from this, MAS had no other connection with the company".

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.

Marvelstone's fund company reported no assets under management from investors over its two years of being a Registered Fund Management Company, and has ceased being a regulated entity.

Mr Cho and his Singaporean wife Gina Heng - who co-founded Marvelstone Group - have also been sued by Singapore property firm Hong Leong Holdings for breaching a licence agreement for 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.

In March 2018, Marvelstone's Lattice80 said it would move the Lattice80 global headquarters to London from Singapore. But a check on the UK companies registry shows that a Lattice 80 UK was dissolved on Jan 9, 2019, with the first notice of a compulsory strike-off made in October 2018. The registered address on Google Maps points to a row of mail and courier shops that send out parcels.

Marvelstone Group has previously said that it makes fintech investments and builds hubs in artificial intelligence and cryptocurrencies, with Mr Cho and his wife, Ms Heng, previously making appearances at international tech conferences as representatives of Marvelstone.

When asked for updates on its plans in May, Marvelstone Group said it was "not obliged" to disclose business plans, any changes made to plans, or the progress of such plans.

Despite the apparent lack of business activity and assets, Marvelstone said Lattice80 is the world's largest fintech hub. It issues reports on fintech influencers.