The founder and former CEO of South Korean cosmetics company Skinfood was sentenced to five years in jail Thursday for stealing some 12 billion won ($9.7 million) from the company's online sales revenue.

The Seoul Western District Court delivered the ruling to Cho Yoon-ho, 52, on account of breach of trust.

Cho is accused of funneling more than 10 billion won in earnings from Skinfood's online sales to his private company from March 2006 till December 2018. He also had a subsidiary of Skinfood pay for his personal costs, including the purchase of horses and their maintenance, according to the court.

In total, he stole some 12 billion won of revenue.

"By having a subsidiary pay for his personal horse purchase and the maintenance and medical examination costs for the horses, (he) inflicted financial damage," the court said.

"The financial damage inflicted on Skinfood and its subsidiary by the crime led to further damage to franchise outlet owners," the court said, adding that Cho neglected his duty to prevent financial damage to the firm.  

The owners of the franchise outlets Skinfood operates nationwide previously argued that the cosmetics brand did not use its online sales revenue to commercially promote its chain as other brands do. Online sales also led to a fall in offline sales of Skinfood products, they argued.

Founded in 2004, Skinfood was among the first-generation lower-end cosmetics brands that helped create the global "K-beauty" sensation.

Its sales once ranked as high as third in the market for budget cosmetics before it was placed under a court receivership in 2018 due to falling sales and worsening financial health. 

Last year, a private equity fund, Pine Tree Partners, took over the company and put it on a normalization program. (Yonhap)