South Korean billionaire Kwon Hyuk-bin loses 35% of Smilegate in a record $1.9 billion divorce

A Seoul court ordered Kwon Hyuk-bin, the billionaire founder of the South Korean video game company Smilegate, to transfer assets worth 2.55 trillion won, or about $1.91 billion, to his former wife on Wednesday, Sept. 9, in the largest divorce award in the country's history.

The Seoul Family Court granted the divorce and directed Kwon, 52, to hand over a 35 percent stake in Smilegate, which it valued at about 2.5 trillion won, or $1.87 billion, along with 65 billion won in cash, roughly $48.6 million. Conversions are at 1,337 won to the dollar, the rate on the day of the ruling.

The award is more than double the previous record of 944 billion won, about $666 million, which the Seoul High Court ordered SK Group chairman Chey Tae-won to pay his former wife, Roh Soh-yeong, in July. Chey appealed that ruling in August.

Kwon is not a household name outside gaming, but he is one of the wealthiest people in South Korea. Forbes put his net worth at $3.5 billion on Sept. 9. Bloomberg placed it at $3 billion.

The company at the centre of the case

Smilegate is a privately held game developer that Kwon founded in Seoul in 2002 after graduating in electronic engineering from Sogang University. He had run a failed education startup and turned down a software engineering job at Samsung before starting it.

The company's breakthrough was CrossFire, a first-person shooter released in 2007 that found only modest success at home and then became a commercial phenomenon in China, where it is operated under licence by the technology group Tencent. Licensing revenue from that arrangement has been Smilegate's main earnings engine ever since. Its other well known title is Lost Ark, an action role-playing game. The company has been buying and investing in other studios since 2020 to widen its portfolio.

Kwon holds the title of chief vision officer rather than chief executive. Smilegate has never listed its shares, which is why the court had to arrive at a valuation of its own before it could divide anything. Yonhap, the South Korean news agency, reported that the court put the company at 7.1 trillion won, or about $5.31 billion. A court official contacted by Reuters could not immediately confirm that figure. Local media reported that the court assessed Kwon's total assets at as much as 8.016 trillion won, roughly $6 billion.

What each side argued

Kwon married Lee Hwa-jin in 2001, a year before he founded the company. They have two children. Lee filed for divorce in November 2022 and asked for half of his shareholding in what was then Smilegate Holdings, since renamed Smilegate.

Her case was that she helped finance the business at its founding and took part in its early management, and that she had contributed indirectly over more than two decades by raising the couple's children and running the household. South Korean courts have increasingly recognised that second category of contribution when dividing marital property, which is what made the Chey ruling a landmark last year.

Kwon argued that Lee neither invested in the company nor worked for it, and that she was not a co-founder. Smilegate issued a statement earlier this year saying all of its initial capital had come from Kwon. He is understood to have opposed the divorce itself.

The court granted it anyway, finding that both sides bore equal responsibility for the breakdown of the marriage. On that basis it also rejected Lee's separate claim for damages. She had sought 50 percent of his holding and was awarded 35 percent of the company.

A Smilegate spokesperson declined to comment on what the company called the personal matters of its major shareholder.

Why the numbers do not match the rich lists

The valuation the court used sits well above what either major wealth tracker carries for Kwon, and the gap is worth spelling out.

Forbes and Bloomberg both value private companies conservatively, applying discounts for the fact that the shares cannot be sold on an open market and often benchmarking against listed peers trading at lower multiples. A Seoul court dividing marital property is doing something different. It is establishing what the asset is worth for the purpose of a transfer between two people, not what a buyer would pay for a minority position in an illiquid company.

Kwon's holding in Smilegate accounts for essentially all of his fortune, so the difference between a 7.1 trillion won valuation and the $3 billion to $3.5 billion range published by the trackers is the difference between two methods applied to the same asset. Neither Forbes nor Bloomberg had updated its figure for Kwon in the hours after the ruling.

The Seoul Family Court is a court of first instance. Its decisions can be appealed to the Seoul High Court, the route Chey took in his own case, where an earlier and larger award was later revised. Neither Kwon nor his lawyers had indicated on Wednesday whether he intends to appeal.

Should the transfer proceed as ordered, Lee would become the second largest shareholder in one of South Korea's biggest game companies, holding a stake the court has priced at close to $1.9 billion in a business whose shares have never traded publicly.