MCN Settlement Dispute Ends Without Embezzlement Charges in Korea

Case Overview

A company that had entered into a multi-channel network (MCN) agreement with an internet broadcaster was reported to the police for occupational embezzlement. The broadcaster claimed that the company had collected settlement payments from streaming platforms on the broadcaster's behalf and had failed to pass on the broadcaster's share. Taeshin Law Firm represented the company through both the police and prosecution stages. The firm reconstructed the payment record and showed that the disagreement arose from differing interpretations of how revenue and costs were allocated under the contract. Both authorities declined to pursue the case, and the client was never indicted.

Background

In an MCN arrangement, a company and a creator agree on how the revenue generated by the creator's broadcasts will be divided. Korean streaming platforms sell digital donation items to viewers, and the resulting settlement payments are divided under that agreement. Because the platform may pay one party on behalf of both, the party holding the funds is expected to account for the other party's share.

The agreement between the client and the broadcaster covered revenue from the client's platform and also revenue from other broadcasts in which the broadcaster took part. Disagreements later emerged over which expenses could be deducted before the remaining revenue was divided. After the contract was signed, the client made payments to the broadcaster, including a rental deposit, unpaid monthly rent and cash advances, and also transferred money described as settlement payments. The parties' messages reflected an ongoing conflict over performance of the contract, including what should be deducted when the final shares were calculated.

Criminal Allegation

The broadcaster filed a complaint alleging occupational embezzlement under Article 356 of the Korean Criminal Act. The complaint made three claims. First, the client had received settlement payments from the platform for donation items, kept them, and used the broadcaster's share without permission. Second, the client had also failed to pay the broadcaster's share of settlement payments for donations received during another broadcast in which the broadcaster participated. Third, the client had used several million won of settlement money at will over multiple occasions.

The complainant supported the complaint with a schedule listing the settlement amounts and unpaid sums by period. Occupational embezzlement carries a maximum of ten years' imprisonment or a fine of up to 30 million won. If the allegation had been accepted, the client, as the contractual counterparty accused of taking the broadcaster's money, would have faced criminal punishment.

Key Legal Issues

The case centered on the legal elements of embezzlement rather than on whether the parties' accounting matched to the won. Under Korean law, embezzlement requires more than a failure to hand over money. The person holding the property must have intended to exclude the owner's rights and to treat the property as their own. This is the requirement of unlawful appropriation intent. A mere refusal to return property, or a delay in payment, is not enough. That distinction matters where the parties disagree about the underlying contract.

Three questions followed. Had the payments the client already made covered the amounts claimed? Did any shortfall reflect an unresolved dispute about deductible expenses rather than misappropriation? And had the client ever intended to keep money that belonged to the broadcaster? The defense also had to address the criminal standard of proof. A settlement disagreement that might support a civil claim does not automatically satisfy the elements of a crime.

Defense Strategy

Taeshin's criminal defense team, led by attorney Jang Hoon, focused on the flow of money and the meaning of the contract.

First, the team submitted bank transfer records showing payments the client had made to the broadcaster after the agreement. These included a rental deposit, unpaid monthly rent and cash advances, as well as several transfers described as settlement payments. The records showed that the client had been paying money out rather than simply keeping the broadcaster's share, and that the amounts claimed could not be accepted at face value.

Second, the team reviewed the contract and the parties' messages. The exchanges showed a dispute over performance of the contract and over which costs should be deducted when settlement was calculated. The gap between the complainant's figures and the client's calculation was consistent with that interpretive disagreement, not with an intent to take the broadcaster's money.

Third, the team addressed intent directly. Embezzlement is not established merely because a payment is disputed or delayed. The team argued that the client had no intent to exclude the broadcaster's rights or to dispose of the funds as its own, and that the record showed an accounting dispute rather than criminal appropriation.

Throughout the investigation, the team worked to place the contract, the payment records and the communications before the authorities so that the financial relationship could be assessed as a whole rather than through the complainant's schedule alone. (See police investigations in Korea.)

Outcome

Police concluded that the occupational embezzlement allegation was not supported by sufficient evidence and closed the case with a no-charge decision without referring it to the prosecution. Prosecutors then reviewed the matter independently and reached the same conclusion, issuing a non-indictment disposition on the ground of insufficient evidence.

In reaching that result, the authorities relied on the Supreme Court's position that embezzlement requires unlawful appropriation intent and is not made out by a mere refusal to return property; the transfer records showing payments for rent, advances and settlement; the fact that the difference between the claimed and calculated amounts appeared to arise from a dispute over contract performance and the scope of deductible costs; and the resulting conclusion that the client's unlawful intent could not be established.

The client therefore ended the investigation without an indictment.

What This Case Shows

Revenue-sharing relationships, whether between broadcasters and MCNs or between agencies and creators, frequently produce disputes over how settlement is calculated. Those disputes can escalate into embezzlement complaints when one side concludes that its share was withheld. This case shows that an unpaid balance does not by itself establish embezzlement in Korea. What matters is whether the funds were held and used with an intent to exclude the other party's rights.

It also shows why payment records matter. Transfers for deposits, rent, advances and earlier settlements can rebut a claim that money was simply taken, and communications can show that the parties were arguing over contract interpretation. For companies and creators in Korean revenue-sharing arrangements, keeping a clear record of what was paid and why, and of which expenses were treated as deductible, is the most practical protection if a civil accounting dispute is later reported as a crime.

A police no-charge decision and a prosecutor's non-indictment are separate dispositions at different stages of Korean criminal procedure. Both end a case without a criminal conviction, but neither is a court acquittal.