LD Carbon, a South Korean environmental materials company active in the tire pyrolysis and recovered carbon black (rCB) sector, has filed a criminal complaint against its former chief executive officer and two senior finance executives over allegations of embezzlement and misuse of government subsidies.

The complaint, submitted to the Suseo Police Station in Seoul, names former CEO Hwang Yong-kyung, Chief Financial Officer Lee Chung-jin, and Finance Manager Han Seung-yeon as suspects in an alleged scheme involving corporate funds and state-backed subsidies between 2022 and 2023.

According to the filing, the company alleges the individuals coordinated unauthorized financial transactions involving inflated employee bonuses, cash repayments, and allegedly improper use of government-supported environmental funding.

Allegations linked to bonus repayment scheme

At the center of the complaint is what LD Carbon describes as a “bonus recycling” scheme allegedly designed to generate off-the-books cash.

The company claims that after raising approximately KRW 18.5 billion (around USD 12.5 million) in Series A funding in 2022, selected employees were instructed to receive inflated bonuses or salary payments and then return portions of the funds in cash.

According to the filing, the arrangement was presented internally as a way to manage tax exposure and facilitate payments outside formal accounting channels.

The complaint references internal documents showing unusually large bonus payments, recordings of conversations with employees, internal communications, and banking records allegedly connected to the movement of funds.

LD Carbon also alleges that the disputed payments were approved through standard internal financial procedures involving the finance department.

Broker fee allegations tied to fundraising

The company further alleges that part of the diverted money was used to pay a brokerage commission linked to the 2022 fundraising round.

According to the complaint, an intermediary involved in introducing investors was promised a success fee equivalent to approximately 2.5% of the capital raised, estimated at around KRW 137.5 million.

LD Carbon claims that although the individuals involved had allegedly agreed to cover the payment personally, company funds were ultimately used through the alleged bonus repayment structure.

The filing also cites internal communications discussing allocation of the fee among executives.

Questions over use of government subsidies

In addition to allegations involving corporate funds, the complaint accuses the former executives of improperly using government subsidies connected to environmental development and export support programs.

LD Carbon participated in programs administered by state-affiliated agencies designed to support environmentally focused businesses and overseas expansion initiatives.

The company alleges that portions of these funds were redirected toward unrelated expenses, including payments to affiliated businesses, purchases unrelated to core operations, and marketing expenditures supported by allegedly fabricated documentation.

The complaint includes internal approval records, supplier invoices, and email correspondence that the company claims support the allegations.

Potential legal and regulatory implications

If substantiated, the allegations could potentially involve violations of South Korean laws related to occupational embezzlement, criminal breach of trust, and misuse of government subsidies.

The complaint alleges coordinated involvement among the three individuals based on their respective executive and financial management roles within the organization.

At this stage, the matter remains at the complaint phase, and authorities have not publicly confirmed whether a formal criminal investigation has been launched.

Separately, the Korea Environmental Industry and Technology Institute (KEITI) reportedly conducted an audit of LD Carbon on April 24, 2026. Further review and preliminary administrative measures could follow if improper use of government funds is confirmed.

Impact on the tire pyrolysis and rCB sector

The case comes amid increasing regulatory scrutiny of companies operating in sustainability-focused industries, including tire recycling, pyrolysis, and advanced material recovery.

LD Carbon operates within the growing market for recovered carbon black (rCB), a material produced through tire pyrolysis that is increasingly being evaluated as an alternative to virgin carbon black in rubber and industrial applications.

The broader rubber recycling industry has attracted significant investment in recent years as governments and manufacturers seek to expand circular economy initiatives and reduce reliance on virgin raw materials.

Outputs generated through tire pyrolysis can include recovered carbon black, tire-derived oil, recovered steel, syngas, and pyrolysis char.

The outcome of the case may influence how regulators, investors, and public agencies evaluate governance, transparency, and oversight standards within the wider sustainability and recycling sectors.

To learn more, read the full original article by Tyre Trends.