[비즈한국] Kang Young-kwon, former chairman of Edison Motors (now KGM Commercial), was acquitted in his first trial on October 29 regarding charges of violating the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (fraud). Edison Motors and former Chairman Kang had been suspected of entering the bid to acquire SsangYong Motor despite lacking the necessary financial capacity. While the trial regarding stock price manipulation by Kang and his associates is still ongoing, Smart Solutions (formerly Edison EV), the entity used in the stock manipulation, has ultimately been delisted. It has been confirmed that the company also lost its lawsuit to invalidate the delisting.
Losing Delisting Invalidation Lawsuit After Stock Market Exit
Smart Solutions, which served as a financing channel for the stock manipulation ring during the SsangYong Motor (now KG Mobility003620) acquisition battle, lost its first-instance lawsuit on November 22 to confirm the invalidity of its delisting decision. Smart Solutions, a KOSDAQ-listed company, was ordered to be delisted by the Corporate Review Committee on February 28 of this year due to a disclaimer of opinion from its auditor. Although the company filed a lawsuit to invalidate the delisting decision on March 12, the loss has made any return to the stock market unlikely.
As a result, the shares held by minority shareholders, who endured over two years of trading suspension, have effectively become worthless. Before the main lawsuit, Smart Solutions had delayed its delisting by filing for an injunction. Initially, the exit trading period was scheduled for March 4–12, but the procedure was suspended after the company’s injunction was granted. However, on July 12, the court dismissed the injunction, and Smart Solutions was expelled from the KOSDAQ market on July 25. The company appealed immediately after the first-instance dismissal of the injunction, but the court dismissed it on August 27.
The wild fluctuations in Edison EV's stock price during the SsangYong Motor acquisition attempt are considered a textbook example of market manipulation. Semicosis changed its name to Edison EV after being acquired in June 2021 by Energy Solutions, the parent company of Edison Motors. Edison EV’s stock, which was in the 1,500 KRW range on April 30, 2021, soared to the 80,000 KRW range during intraday trading on November 12 of that same year, fueled by news of Edison Motors' bid for SsangYong Motor.
However, Edison Motors, lacking the actual capacity for the acquisition, paid only the down payment and failed to pay the balance, ultimately collapsing the deal. In the aftermath, Edison EV's stock price plummeted. To make matters worse, trading was suspended in March 2022 due to a disclaimer of opinion in the audit report (citing uncertainty about the company's ability to continue as a going concern). The losses incurred by minority shareholders in this process are estimated at 700 billion KRW. Meanwhile, the investment association that was the major shareholder of Edison EV sparked a "hit-and-run" controversy by selling off more than half of its stake as the stock price surged. In June 2022, Edison EV changed its name to Smart Solutions in an attempt to recover.
Minority shareholders, who worked hard to prevent the delisting, are feeling deeply demoralized. As of the first half of this year, minority shareholders held a 71.9% stake (41.84 million shares) of Smart Solutions’ total shares (58.2 million). According to the "Minority Shareholders' Group for the Normalization of Smart Solutions," about 40,000 minority shareholders sold their holdings during the exit trading period, and it is estimated that about 40 million shares remain.
According to the Corporate Review Committee's meeting minutes regarding the delisting, Smart Solutions emphasized its efforts to secure capital and achieve sales, but failed to receive a re-audit report as the external auditor questioned the materials provided by the company. Earlier this year, there were expectations that Smart Solutions would improve its financial situation by securing cash through the sale of its subsidiary Inosys, the sale of its Suwon office building, and the conversion of convertible bonds (CB) and bonds with warrants (BW) into shares (Related article: 'Delisting Crisis Due to Edison... Smart Solutions Struggles for a Comeback').
However, the committee decided on delisting because, despite being given multiple opportunities over a two-year improvement period, Smart Solutions failed to provide a re-audit report, citing conflicts with the auditor as the reason.
Former Chairman Kang Young-kwon Acquitted of Fraud in First Trial… Attention Turns to Impact on Remaining Rulings
Meanwhile, it remains uncertain whether the minority shareholders holding these worthless shares will find any legal recourse. Smart Solutions has several ongoing lawsuits against former Chairman Kang Young-kwon and his associates, Edison Motors, and KG Mobility, but has not won a single case to date.
A claim for return of unjust enrichment filed by Smart Solutions on November 25, 2022, against Edison Motors and former Chairman Kang, seeking the return of 50 billion KRW in stock purchase payments and 1 billion KRW in damages from stock manipulation, has not even seen a hearing in two years. The lawsuit filed against KG Mobility for the return of the SsangYong Motor acquisition deposit resulted in a loss in the first trial on January 25, and the case is currently in its second trial.
Amidst this, the acquittal of former Chairman Kang Young-kwon in his first fraud trial has further deepened the despair of minority shareholders. Kang was indicted in April 2023 on charges of securing 14 billion KRW in loans and investments from the Korea SMEs and Startups Agency by presenting false mass-production plans for electric vehicles. The Seoul Southern District Court ruled that, given Edison Motors' collaboration with a Chinese company, it was difficult to conclude that the EV mass-production and motor development plans were false, and thus did not recognize any fraudulent intent or deception. The prosecution appealed the first-instance ruling on November 4.
Kang and his associates are entangled in several other lawsuits. The trial regarding violations of the Capital Markets Act—in which they are accused of manipulating Edison EV's stock price to gain 162.1 billion KRW in profits—has yet to reach a verdict.
Minority shareholders of Smart Solutions vented their anger toward former Chairman Kang and the company. Kim, a representative of the minority shareholder group, emphasized, "Our greatest resentment is toward former Chairman Kang Young-kwon, who ruined the company with the lie of acquiring SsangYong Motor. I worked hard to prevent the delisting, so it feels futile." He added, "I also question whether the company made sufficient efforts. The current management is composed of people with no relevant experience in management or accounting. Some come from companies that experienced similar issues to Smart Solutions, raising suspicions that they might be corporate raiders. We will continue to take action on behalf of minority shareholders to recover our losses."