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Gravity Falls on Probe

Gravity (GRVY - Get Report) said it is investigating what it called "certain irregular activities," allegedly on the part of former management.

The Seoul-based online games company said former Chairman Jung Ryool Kim "acknowledged" that $6 million in royalty payments weren't accounted for in Gravity's financials. The company said Kim agreed to pay Gravity $7.3 million, representing the funds in question plus interest, on Monday. Gravity said it is assessing the impact on previous financial statements.

Kim last month left the Gravity board after selling his majority stake to an investor group led by Il Young Ryu, also known as Nichiei Ryu, and Taizo and Masayoshi Son. The group agreed in August to a takeover of Gravity.

Gravity said its audit committee, comprising independent directors who joined the board since the takeover, has begun an investigation and hired law firms Cleary Gottlieb Steen & Hamilton and Woo Yun Kang Jeong & Han to help.

"We don't know the full details surrounding the incident and the audit committee is currently conducting a full-scale investigation," Ryu said. "Appropriate authorities have already been notified and the Company will announce the findings from the investigation as soon as more facts are discovered."

On Tuesday, Gravity fell 62 cents to $7.

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