How a No-Capital Takeover Scheme Works: LG Family Heir Arrested After 8 Years

A no-capital takeover is when a buyer gains control of a listed company using almost entirely borrowed money, and South Korean police say Koo Bon-hyun, a 57-year-old member of the extended LG founding family, combined that tactic with false disclosures to pump up share prices. Koo was formally detained on November 11, 2026, after eight years abroad.

Who is Koo Bon-hyun and why was he arrested

Koo is a former chief executive of Exa E&C and the son of Koo Ja-geuk, the youngest brother of LG honorary chairman Koo Ja-kyung, according to reports. He belongs to the wider founding family, which is why Korean media describe him as a third-generation member of the extended LG family.

The Seoul Metropolitan Police Agency's financial crimes unit said on November 13 that it had brought Koo back from Cambodia and arrested him on November 9. A court approved his detention on November 11. He faces charges of fraudulent unfair trading under the Financial Investment Services and Capital Markets Act, along with embezzlement and breach of trust.

According to reports of the police briefing, Koo left South Korea for the Netherlands in October 2018 while the Financial Supervisory Service was still examining the case. He then moved through France and Thailand to Cambodia. Interpol issued a red notice in May 2019. Cambodian police caught him during a routine check on August 25, 2026, and he was returned to Seoul this month. Police said he largely admitted the allegations but disputes details such as how roles were divided among the accomplices, according to reports.

What a no-capital takeover means

In a normal acquisition, a buyer uses its own capital, or at least discloses honestly how much of the purchase price was borrowed. Buyers of large stakes in Korean listed companies disclose the source of their funds in public filings, and investors can read that information as a signal of how committed the new owner is.

A no-capital takeover flips that logic. The buyer borrows nearly the entire purchase price, often by pledging the very shares being bought as collateral. Borrowing to buy a company is not illegal by itself; the alleged problem is the hidden borrowing, police say.

How the alleged scheme worked, step by step

Between February 2016 and December 2017, Koo and his accomplices bought two companies listed on KOSDAQ, Korea's market for smaller and technology firms, using borrowed money, according to police. One example cited in reports: a borrowed-name investment company with about 100 million won (about $75,000) in capital took out 6.5 billion won (about $4.9 million) in loans from savings banks and other lenders to buy one of the firms.

In public filings, however, police say the purchase money was described as the buyer's own funds. Police also say the group concealed that it had bought shares under other people's names and had pledged shares as loan collateral.

Next, the group used the listed companies to raise more money through convertible bonds and bonds with warrants, and used loans backed by company shares to buy stakes in a private company that looked promising, eventually up to 90% of a game item trading business, according to reports. Police say those purchases were announced as good news, again presented as if they had been funded with the buyer's own capital.

The share price responded. One of the companies traded in the 6,000-won range in November 2016 and reached the 16,000-won range by April 2017, according to reports. That is roughly a 2.7-fold increase in less than six months, by our calculation. Police say the group then sold shares it held under borrowed names and pocketed the gains.

What happened to ordinary investors

The rally did not last. One company received a disclaimer of opinion from its auditor in March 2018, meaning the auditor refused to sign off on its financial statements, and it was delisted in October 2018. The other company was delisted in September 2018. At the time, media reports put losses at around 200 billion won (about $150 million at 1,336.7 won per dollar, the November 13 Seoul close) for roughly 10,000 individual investors. Police say they cannot yet confirm the exact number of victims or the total loss.

How much money is at stake

Prosecutors originally estimated Koo's illegal gains at about 14.5 billion won (about $10.8 million). When the court heard the cases of his accomplices, however, it found the amount difficult to pin down, and police are now recalculating it. Two accomplices received final sentences in 2023 of five years in prison with a 500 million won (about $374,000) fine, and three and a half years with a 300 million won (about $224,000) fine.

Koo is also accused of embezzling about 4.6 billion won (about $3.4 million) and of breach of trust involving about 12.3 billion won (about $9.2 million). Police said they are considering freezing assets before indictment to recover criminal proceeds.

President Lee Jae-myung shared news of the arrest on X and wrote that suspects should know that overseas is no longer a safe hiding place, according to reports.

Key terms

- No-capital takeover: buying control of a listed company with mostly borrowed money.

- Disclaimer of opinion: an auditor's refusal to give an opinion on a company's financial statements, which can lead to delisting in Korea.

- Borrowed-name shares: shares registered under another person's name to hide the real owner.

Bottom line

The core allegation is simple: borrowed money was presented as the buyer's own, and that false signal helped lift share prices before insiders sold. The next step to watch is how much illegal profit police ultimately attribute to Koo, after a court found prosecutors' earlier 14.5 billion won estimate difficult to pin down in his accomplices' cases.