A South Korean business man legendary in the local startup scene has been arrested and charged for defrauding a total of 5 billion won ($4.3 million) from a local government agency and companies it invested in.
Ho Changseong, CEO and founder of The Ventures, a startup accelerator, was arrested by local prosecutors Monday for allegedly swindling five start-ups out of free shares worth 3 billion won ($2.6 million) in exchange for promises of high subsidies from the government-backed Tech Incubator Program for Startup (TIPS), it was revealed Wednesday by Korean media Hankyung.
He is also charged with creating fake investment contracts that hid the fact that he received the free shares to defraud the government of a further 2 billion won ($1.7 million).
The TIPS program was created by the Small and Medium Business Administration to foster startups and provide angel investments, acceleration, and mentoring with an annual budget of 250 billion won.
It works with private investors such as The Ventures, which suggests promising startups to the program. Once 10 million won in venture capital is invested, the agency provides an additional 90 million won to the selected startups.
The Ventures, in its Facebook page, denied the charges, claiming that no false contracts to hide share allotment was ever made and it never broke TIPS guidelines.
"We will actively fight the false accusations and we ask those who helped The Ventures contribute to the Korean venture scene to send their cheers," it said in a statement.
Ho founded The Ventures back in 2014 together with Moon Ji-won, who he co-founded TV content distribution service provide Viki back in 2007. Ho grabbed headlines when he sold the business to Japan's Rakuten for a whopping $200 million, one of the biggest sales price for a Korean startup.
The 42-year-old started his career back in the late 90s during South Korea's startup boom that began with the spread of the internet.
His arrest has prompted worries from the local startup scene that it will freeze investments and cause distrust.
Ventures and the prosecution were unavailable for comment.