Massive scandal takes down PC cooling innovator Zalman Tech

The company made some awesome fans, but its management wasn't so good.

Even as the PC market hit the skids in recent years, the hobbyist/home builder market hung in there. People like me, for whom Fry's Electronics or Micro Center is like a supermarket, kept building and upgrading their systems while HP, Dell and Acer were looking at sales reports and weeping.

We hobbyists may be small in number but we're keeping a lot of companies alive. CPU Magazine, which caters to home builders, is still publishing monthly when pretty much everyone else has given up on print, and Newegg.com continues to grow.

One prominent name for home builders is about to disappear, though, through no fault of the market or even its own. Zalman Tech, a Korean company known for bringing a lot of innovation in silent PC cooling, might be finished. The firm filed for bankruptcy earlier this week.

The problem lies with Moneual, Zalman's parent company. According to reports in the Korean press, Moneual was allegedly involved in a very well designed and planned multi-billion dollar corporate fraud.

It started when Moneual failed to repay their massive export bonds that matured on October 20, 2014 and eventually filed for bankruptcy.

This didn't make sense. Moneual has been repeatedly reporting that it was profitable. Its 2013 annual report claims nearly $1.2 billion in sales and over $100 million in earnings. As it turns out, those earnings might be a fabrication, used to inflate the company's value and then take out massive loans.

Zalman was apparently part of the scam. Moneual acquired Zalman in 2011 and allegedly forged Zalman's export and accounting documents, greatly overstating their export and income reports in order to become eligible for those multi-billion dollar loans.

And it seems employees within Moneual knew of this and said nothing. One employee interviewed by Korea JoongAng Daily said he kept his mouth shut because he was paid very well for his silence even as he saw the owners living high on the hog and pillaging the company.

The Korean Times reports the country's Financial Supervisory Service (FSS) is investigating whether Zalman violated corporate accounting rules due to unusual activity on Zalman stock just before Moneual filed for court receivership.

It's hard to say what will happen to Zalman because I don't know Korean law or how deep Zalman is in all of this, whether it was a victim used by the brothers who ran Moneual or an active partner. All I know is I've bought my share of Zalman cooling products and for once, my PC didn't sound like a jet engine on takeoff.

Hopefully the IP can be acquired by another cooling firm and the engineers find a new home, but I have to say, this is one huge scandal for Korea that's hitting the banks that loaned Moneual money and might even make the business news here. We're talking fraud in the billions of dollars.

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