The recent unraveling of the once-promising venture firm Moneual has touched off skepticism that leading commercial banks lack the ability to pick out qualified loan recipients.

The state-run Export-Import Bank of Korea, which granted Moneual up to 110 billion won ($103 million) in loans and selected it as a potential export champion, was last week hit with a barrage of criticism over its support of the company.

Moneual, a venture firm known for manufacturing robot vacuum cleaners and baking machines, filed for court receivership on Oct. 20, declaring itself incapable of paying the matured export bonds worth 500 billion won to NongHyup Bank and Korea Industrial Bank.

This sent shockwaves through the home appliance industry and local financial circles, as the company had been deemed a model for successful startups, reportedly achieving 1.27 trillion won in sales and 110 billion in operating profit in 2013.

Now, it turns out that Moneual falsified records of its business performance to qualify for up to 670 billion won of loans from the local banking industry, and also to be chosen as an export champion.

On Saturday, the Korea Customs Service said that Moneual CEO Park Hong-sung had overstated the company’s export figures by 3.2 trillion won over the past six years.

In order to create the false financial records, he resorted to a number of fraudulent accounting methods including marking down outdated dysfunctional computers as inventory to overstate their actual value.

After receiving the loans, Park transferred the money to his overseas accounts and used it for personal purposes, according to KCS officials.

Besides the loan fraud, Moneual was also enjoying state subsidies after it was selected in 2012 as a “Hidden Champion“ as a part of a signature program run by EXIM Bank to back small and medium-sized companies with substantial growth potential as exporters.

Over the past two years, EXIM Bank has offered interest-free loans worth 250 billion won to Moneual.

“EXIM Bank initially selected 318 companies, and later crossed out 27 of them, citing their insufficient qualifications,” said Rep. Park Beom-kye of the main opposition New Politics Alliance for Democracy during a recent parliamentary audit.

But even then, Moneual was not included on the blacklist, which indicates that the bank’s internal control system was not functioning properly, according to the lawmaker.

“All business performances were above the required level, showing no signs of flaws, and we are looking closely into the details,” said EXIM Bank head Lee Duk-hoon during the audit.

Creditor banks including EXIM Bank, also claimed that their loan approval was based on the 325.5 billion won warranty issued earlier by the Korea Trade Insurance Corp., or K-sure.

Meanwhile, suspicions also built up as a former K-sure employee in charge of Moneual quit his post just days before the corresponding company filed for court receivership.

The state-run trade insurance company has started an internal investigation on whether the former employee had colluded with Moneual in issuing the unfounded trade warranty.

By Bae Hyun-jung (tellme@heraldcorp.com)