UPDATE

Zalman USA have been in contact with Tomshardware to deny the reports of the Zalman HQ being bankrupt:



So, with their parent company in hot water what exactly will the future spell for Zalman? Only time will tell.

--

Original Story:



Zalman Inc have a long and storied history in the PC market. With a product line-up that includes cooling components of seemingly every shape and size, as well as non-cooling devices by the shed-load, at one stage there were few names more significant to the enthusiast. All this makes the fact that they filed for bankruptcy protection this week somewhat baffling, but the details behind it are murkier still.

Recent events appear to have been precipitated by their parent company's failure to repay export bonds. Moneual, who acquired Zalman in 2011 and reported revenue of over 1 trillion Korean won last year alone, was the darling of South Korean entrepreneurship. In a very short period of time - less than seven years - they graduated from a manufacturing company on the brink to a titan reporting billion-dollar sales figures and $100 million profits.

Moneual's perceived strength allowed it to qualify for increasingly large government loans and tax incentives, resulting in a huge expansion through acquiring the smaller fish needed to beef up its portfolio. Sadly, according to an interview with an anonymous employee, it was all a scam predicated on inflated international export figures, aggressive advertising campaigns and international design awards for products cooked up cheaply by their new acquisitions or off the shelf in China. To outside observers Moneual was a dynamic player in robotics technology; their books apparently told a very different tale.

In total Korean customs and financial groups state that Moneual borrowed or had credit lines extended to over 3.2 trillion won from 10 banks over six years, and to date have failed to repay 674.5 billion won. Loans specifically for refurbishing or modernising factories and other business costs were instead diverted into company coffers and personal accounts, funding lavish lifestyles and payoffs for those who knew of the scheme.



Meanwhile the likes of Zalman - healthy organisations with design chops and revenue streams - were slowly bled dry to maintain the day-to-day running of Moneual or leveraged further for government grants, loans and projects. Just how deep the rot went isn't clear, but there are allegations that Zalman's own export ledger was compromised in the fraud.

The impact on Zalman has been significant. Trading in their shares was suspended after their value plumeted more than 60% in 10 days, bankruptcy protection has been applied for, and still lingering are the consumers uncertainties over product warranties and the exposure of their international subsidiaries. After creditors and shareholders have had their respective pound of flesh there will hopefully be enough of a viable company left for them to continuing operating or have their intellectual property picked up, but this could easily be the end of the name.

We will probably never know the true extent of any fraud, although the Moneual CEO Park Hong-seok appears to be spilling the beans to customs officials after being arrested last week. That said, Korean and international authorities will also have to answer questions on just how a fraud of this scale could be perpetuated without their knowledge.

More information can be found in these two articles by Korea JoonAng Daily (1, 2)

Source: AnandTech.com, FutureLooks.com.