Chairman of Marvelstone Group sued in Korea for non-payments of returns to investors
- AVN
- Sep 20, 2019
- 3 min read
Updated: Sep 21, 2019
Joe Cho Seunghyun—chairman and founder of Singapore-based Marvelstone Group—is being sued in his home country (South Korea) for allegedly failing to pay promised returns to investors.
In one disputed case, South Korean investor Chun Yong Beon had invested S$250,000 in Marvelstone Partners in 2015. As per legal documents review by The Business Times, Marvelstone Partners’ CEO was Mr Cho. Marvelstone Partners had guaranteed a 33% interest per annum on the invested capital, with the funds meant to go into another project that was later listed. The contract, which was signed off by Mr Cho, further guaranteed a profit on exit. According to Mr Chun, this guaranteed return due end-March 2018 was never received.
This is not the first time Mr Cho is involved in a legal dispute. In July 2017, a lawyer for 6 South Korean investors sent a letter to him to question about delays regarding redemptions from a separate fund under Marvelstone Ltd. The 2013 prospectus for this fund said it was “conservative” and “stable”, although it did not guarantee that returns could be generated daily. In 2012, the fund’s performance return was about 40%, the last available full year at that point.
Regarding this, the question raised here is, “Did the investors verify the claims (33% return on investment or 40% fund returns) made by Marvelstone Partners?” Analysing this, anyone would be sceptical of the claims made by the fund, such as who or what is backing this fund as well as their specific investments. In addition, the confidence Marvelstone Partners showed in guaranteeing a profit on exit makes the deal more suspicious. Unfortunately, such information may not be readily available for outsiders.
On this note, investors of this fund should instead request the prospectus of the fund to seek more information regarding the offering. However, simply referring to their documents may not be accurate as there is a chance that it may be fraudulently manipulated especially since Marvelstone Group is a private company — they are not legally required to release documents to the public. At the very least, a simple due diligence check should have been done.
With reference to online articles, the co-founder and chief executive of Marvelstone Group, Gina Heng, was consistently painted as a star entrepreneur. She was the founder of Miss Kaya, Singapore’s first licensed Robo-advisor. Under Marvelstone Group, Gina Heng and Mr Cho also lead the initiation to set up Lattice80, world’s largest fin-tech hub.
On Bloomberg, Marvelstone Group is a venture capital and private equity firm specializing in all stages, including startups in earlier stages, growth companies facing an IPO, a merger, or acquisition.
Overall, while the founders seem credible with significant experience, the firm has only made 3 investments to date. It would seem that their portfolio lacks diversification.
A savvy investor should instead take a deeper look into their background. Take for example Lattice80, a not-for-profit initiative led by Marvelstone Group, also the world’s largest fin-tech hub that gained the approval of MAS. Nevertheless, the recent closure of the very same hub raises questions about their actual capabilities in managing the fund. In addition, is working 1 year as a research analyst at Bank of Tokyo-Mitsubishi UFJ enough for someone like Gina Heng to set up and manage a fund efficiently?
Overall, it is clear that there isn’t enough information currently to make an informed decision on whether this is a good investment. An individual valuation can be done by a third party to reduce risk exposure. However, if there’s not enough information, perhaps the safest bet is to avoid investing in it.
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