SEC Charges CEO of Software Development Company for Improperly Arranging the Company's Guarantee of His Personal Debts
June 8, 2022
File No. 3-20895
June 8, 2022 - The Securities and Exchange Commission today announced settled charges against Jae Cheol Oh, the Chairman, CEO, and CFO of South Korea-based I-ON Digital Corp., for arranging a guarantee of his personal debts by I-ON Digital's subsidiary. Oh also arranged for I-ON Digital to restrict a significant portion of its cash as collateral for the loan guarantee.
According to the SEC's order, when I-ON Digital became a public company in February 2018, Oh arranged for I-ON Digital's subsidiary, I-ON Communications, Ltd., to guarantee approximately $1.5 million in personal loans to Oh, plus interest, and for I-ON Digital to restrict a material portion of its cash as collateral for the loan guarantee. The loans to Oh were extended several times after 2018 and I-ON Digital continued to restrict its cash and guarantee Oh's personal obligations to banks. In 2021, the restricted cash was 43% of I-ON Digital's total cash and 13% of its total assets.
As a result, the SEC's order finds that Oh caused I-ON Digital's violations of Section 13(k) of the Securities Exchange Act of 1934. Section 13(k), an important investor protection to prevent conflicts of interest, prohibits public companies such as I-ON Digital from extending or maintaining credit in the form of a personal loan to any executive officer or director. Without admitting or denying the SEC's findings, Oh agreed to: cease and desist from committing or causing violations of Section 13(k); arrange for I-ON Digital to cease guaranteeing repayment of loans to Oh and cease restricting cash as collateral for the loan guarantees; and pay a $150,000 penalty.
The SEC's investigation was conducted by John McNulty, with the assistance of Dan Furlano and Peter Rosario, and was supervised by Lisa Deitch.