Korea’s tax authority to scrutinize Coupang, including dealings with US holding company
While it may be difficult to hold Coupang directly liable for the recent data breach that affected more than 33 million users, the US-listed company can still be held accountable for an alleged failure to fulfill its fiduciary duties — and no jurisdictional restrictions apply, a case attorney said.
New York-based investor rights law firm The Rosen Law Firm on Thursday filed a class-action lawsuit against Coupang in the US District Court for the Northern District of California on behalf of the company's investors.
The class action suit challenges Coupang's stock price declines and investment losses stemming from alleged failures in corporate disclosures, financial reporting or internal controls.
"There are no jurisdictional limitations for the securities case since it is brought on behalf of those who purchased Coupang stock listed on the New York Stock Exchange," said Phillip Kim, attorney at The Rosen Law Firm, when asked by The Korea Herald whether there were any jurisdictional limitations on pursuing a securities class action against Coupang in the US court.
Coupang Inc. is a holding company listed and domiciled in the US, but the e-commerce giant’s core operations are based in South Korea, creating jurisdictional complexities over liability.
As a result, holding Coupang liable in the US for the cybersecurity breach itself may be constrained, but claims based on its failure to fulfill fiduciary duties remain viable.
"So, someone in South Korea or anywhere else in the world who bought Coupang stock can join the US class action,” Kim said, adding that investors are eligible regardless of whether their losses have been realized, and that citizenship and residency do not matter.
According to the complaint, Coupang had failed to uphold its fiduciary responsibilities by having inadequate cybersecurity protocols that led to a security breach, exposing the company to a materially heightened risk of regulatory and legal scrutiny.
It further alleged that when Coupang became aware of the data breach, it failed to file a report with the US Securities and Exchange Commission in accordance with applicable disclosure rules, thereby depriving investors of the opportunity to make informed investment decisions.
Any investor who purchased Coupang shares between Aug. 6 and Dec. 25 and incurred losses — whether realized or unrealized — is eligible to join the class action seeking monetary damages. During that period, Coupang’s market capitalization fell to $42.4 billion from $53.3 billion.
Though Coupang faces multiple class action suits following the cybersecurity breach, The Rosen Law Firm focuses on the retailer's alleged failure to carry out fiduciary responsibilities.
"We are not involved in any case on behalf of those whose data was compromised," Kim said, drawing a line between the investor lawsuit and any consumer-related claims.
The Rosen Law Firm was involved in a securities class action against Coupang, which claimed that Coupang’s initial public offering registration statement contained misleading disclosures that defrauded shareholders during and after its US market debut in 2021. Kim was the case attorney.
It filed a securities class action in 2022, but the case was later taken over by different lead plaintiffs. A US federal court dismissed the case with prejudice in September, meaning the claims cannot be refiled, although the plaintiffs have indicated they plan to appeal the ruling.
Meanwhile, the National Tax Service launched a probe into Coupang Fullfillment Service, a logistics unit of the online retailer, on Monday. With the tax agency mobilizing a specialized unit overseeing cross-border transactions, the industry expects the NTS to conduct an intensive review of the unit's dealings with the US headquarters.
The NTS dispatched roughly 150 investigators to secure accounting records and other materials needed for a tax probe.
silverstar@heraldcorp.com
