3 Former Loen Entertainment Executives Receive Sentences For Stealing Royalties While Operating Melon

Former executives of Loen Entertainment have been declared guilty in their first trial over charges of stealing royalties while the company was operating the music platform Melon.

Former Loen Entertainment CEO “Shin” had previously been indicted on charges of violating the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (fraud). On February 16, the Seoul Eastern District Court sentenced Shin to three years and six months in prison.

The company’s former vice-president “Lee,” who was brought to trial along with Shin, was sentenced to two years and six months in prison with a probation period of four years. Former director “Kim” received a sentence of a year and six months, with a probation period of three years. This means that these two executives will only serve the prison sentences if they commit another offense during their probation period.

Shin and the other executives were indicted in September 2019 on charges of stealing 18.2 billion won (approximately $16.4 million) while operating Melon. This included stealing 4.1 billion won (approximately $3.7 million) in royalties by creating a phantom record company named “LS Music” in 2009. It’s described that they took songs whose copyright protection had expired and registered them as though LS Music had the rights to them. They then fabricated records to make it look like Melon users had downloaded songs from LS Music.

In addition, from April 2010 to April 2013, they did not pay 14.1 billion won (approximately $12.7 million) that should have gone to copyright holders. They did this by taking advantage of Melon’s changed royalty distribution system. The system allowed copyright holders to be paid by a ratio of the total number of Melon users. In April 2010, Melon made a change to the system to exclude users who were making regular payments without actually using the service from the total number of its users. However, they are said to have withheld this information from copyright holders, thus stealing royalties that came from non-users.

The court found them guilty on all charges presented and stated, “The defendants committed the crime of using dishonest methods to deceive the music rights holders and therefore steal the money that those people should have received, losing their trust. There is much room for criticism.”

“As Shin had the right to make the final decision over this systematized crime, he has the highest liability and there is the most room for criticism,” the court stated.

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