Smilegate founder and Chief Vision Officer (CVO) Kwon Hyuk-bin will transfer a 35% stake in the company to his spouse.
On the 9th, the Family Division 3 of the Seoul Family Court (Presiding Judge Jung Dong-hyeok) granted the divorce request in a divorce and property division lawsuit filed by Ms. Lee against CVO Kwon, ordering Kwon to transfer 35% of his Smilegate shares to Lee. In addition, the court ordered Kwon to pay 65 billion won in cash plus damages for delay starting the day after the ruling. This comes about four years after Lee filed the lawsuit in November 2022.
The court ruled that the couple's marriage had broken down beyond repair. This conclusion was reached after examining the history and escalation of their long-standing conflicts and the possibility of restoring their relationship.
However, the court determined that both parties shared equal responsibility for the breakdown of the marriage. It accepted the divorce petition, stating that the situation fell under "severe reasons making it difficult to continue the marriage" under the Civil Act.
However, it dismissed the claim for alimony. The court did not accept Lee's argument that CVO Kwon was solely at fault for the breakdown.
Regarding the biggest issue in dispute—whether the Smilegate shares should be included in the property division—the court ruled in favor of Lee's position. The court judged that the shares were marital property directly and indirectly accumulated together by the couple, citing the company's founding and growth history, Lee's record of holding a stake and serving as a director in predecessor entity Smilegate Entertainment, and her total dedication to housework and child-rearing.
The court deemed it appropriate to calculate the value of the shares on the premise that Smilegate had merged its subsidiaries prior to the valuation reference date. Potential future growth was also taken into account.
The division ratio was set at 35% for Lee and 65% for CVO Kwon. The court judged that CVO Kwon made a greater contribution, as decisions made during the company's establishment and management determined its growth. However, it stated that it took into account various factors, including the inclusion of the stock in the marital estate, Lee's support, the high valuation of former subsidiary Smilegate RPG in a recent separate case, the duration of the marriage, the circumstances of the breakdown, and the age and financial status of both parties.
CVO Kwon's asset composition was cited as the reason for choosing an in-kind division rather than a cash settlement. According to the ruling, his net assets total approximately 7.3 trillion won, with Smilegate stock accounting for 96% at about 7.1049 trillion won. The court explained that raising cash without disposing of the stock was realistically difficult, selling the unlisted shares itself was not easy, and the costs and taxes associated with disposal had to be considered.
The fact that CVO Kwon holds a 100% stake, meaning he would not lose controlling power even after transferring a portion, was also cited as grounds for the decision.
Child custody was decided based on the wishes of both parties, as there was no major disagreement. Lee was designated as the primary caregiver, and CVO Kwon must pay 20 million won in child support at the end of each month starting this month. Litigation costs will be borne separately by each party.
Previously, when Lee filed the lawsuit in November 2022, she demanded half of CVO Kwon's stake, arguing that she contributed to the accumulation of wealth through over 20 years of marriage, child-rearing, and participation in early-stage management. CVO Kwon's side countered that Lee was neither a co-founder nor had she made capital contributions. Because Smilegate is an unlisted company with no objective valuation criteria, the court conducted an asset appraisal through court-appointed appraisers, which reportedly valued CVO Kwon's assets between approximately 4.9 trillion won and up to 8.016 trillion won depending on the valuation method. Lee was also granted a preliminary injunction prohibiting the disposal of shares to prevent the equity from being sold until the litigation concluded.
Born in 1974, CVO Kwon graduated from Sogang University's Department of Electronic Engineering in 1999 and founded Smilegate in 2002 with initial capital of 50 million won. The couple met during their time at Sogang University and married in 2001. At the time of founding, the shareholding was reportedly 70% for CVO Kwon and 30% for Lee, with Lee serving as the initial CEO. Lee's stake was diluted to 3% through new share issuances and was sold entirely to China's Tencent around 2010. CVO Kwon bought those shares back in 2012, completing a 100% sole ownership structure. In the same year, he assumed the position of chairman of the public foundation Smilegate Hope Studio, and became CVO in 2020.
If the ruling is finalized, the sole 100% governance structure maintained for over 20 years will be broken. CVO Kwon's stake will decrease to 70%, and Smilegate will welcome shareholders other than its founder. Smilegate is the only major domestic gaming company to maintain an unlisted status. On January 1 of this year, holding company Smilegate Holdings absorbed and merged Smilegate Entertainment, developer of 'Crossfire', and Smilegate RPG, developer of 'Lost Ark', transitioning into the unified corporate entity 'Smilegate'. This choice ran counter to the industry trend of spinning off subsidiaries to reinforce project-specific responsible management. The unified entity is led by CEO Sung Jun-ho.
With the decision for an in-kind division, pressure for an initial public offering (IPO), which had been discussed as a means of raising funds, has been avoided for now. At the time of transitioning into the unified corporate entity, the company stated that "corporate integration is unrelated to going public," and maintained its stance of having no IPO plans until recently. However, depending on how Lee disposes of her 35% stake, new avenues for external capital to enter could open up.
