Ex-head of DDB Korea indicted for W4.3b fraud scheme involving fake game ad contracts

Prosecutors have indicted the former head of advertising agency DDB Korea on charges of defrauding a subcontractor out of billions of won by falsely promising to award contracts for a major game advertising campaign that never existed. Prosecutors are also separately investigating a case referred by the Korea Fair Trade Commission over the company's alleged unfair subcontracting practices.

The Seoul Central District Prosecutors' Office's Criminal Division 7, led by Chief Prosecutor Jo Yun-cheol, indicted the former DDB Korea chief — identified only by his surname Lee — on June 22 on charges of violating the Act on the Aggravated Punishment of Specific Economic Crimes (fraud). He was indicted without being taken into custody.

Lee is accused of approaching subcontractors that did business with DDB Korea while implying he would award them contracts for a high-profile game advertising campaign, then demanding they pay service fees upfront. He allegedly received about 4.3 billion won ($2.79 million) from one company, referred to as Company A. He also faces charges of collecting 1 billion won from Company A under the guise of a bid bond, claiming it was needed to verify the company's financial capacity.

DDB Korea had been the South Korean arm of DDB Worldwide, a subsidiary of Omnicom — a global advertising conglomerate listed on a US stock exchange. In December 2023, however, the parent company sold its entire stake in DDB Korea to a third-party entity. The company retained the "DDB" name but became embroiled in a separate controversy in 2024 when it failed to pay hundreds of billions of won owed to vendors.

The case against Lee dates to around April 2023, when he was serving as an executive director at DDB Korea. He approached Company A claiming that game company "G" had commissioned DDB Korea to run an advertising campaign for its game "R," and offered to award contracts worth about 8 billion won.

Investigators found that DDB Korea deceived Company A by promising to pay back the service fees — plus an additional roughly 1 billion won on top — within 30 days, provided Company A first paid the designated subcontractors. In reality, DDB Korea never ran any advertising campaign for game R, and the subcontractors it named performed no services either.

Prosecutors believe DDB Korea intended to use Company A to cover outstanding payments it owed to its own subcontractors. They concluded that even if Company A had paid those subcontractors, DDB Korea had neither the intention nor the ability to award Company A any contracts or pay it for its services.

Company A nonetheless believed Lee and wired 990 million won around May 2023, going on to transfer a total of 4.28 billion won across 17 separate transactions through around June of that year. Investigators found that DDB Korea's fraud against Company A continued even after that.

Around June 2023, DDB Korea told Company A that DDB Worldwide — its parent — required proof of the company's financial capacity and asked it to wire a bid bond, promising the funds would be returned within seven business days once the parent confirmed receipt.

Company A wired a total of 1 billion won to DDB Korea. DDB Worldwide, however, never actually requested a bid bond. Prosecutors concluded that DDB Korea had neither the intention nor the ability to return the money once it received it.

Company A subsequently filed a complaint against Lee and others at DDB Korea. The Gangnam Police Station investigated the case and forwarded it to prosecutors in 2024 after finding sufficient grounds to charge Lee. Prosecutors sent the case back once for supplementary investigation before indicting Lee without detention on June 22.

Company A also filed a complaint with the Fair Trade Commission in 2023. DDB Korea reportedly argued before the commission that the payments were simply service fee debts with agreed repayment dates, and that the bid bond was a debt obligation. The Fair Trade Commission rejected those arguments, imposed a penalty on DDB Korea in April last year and referred the case to prosecutors.

The Fair Trade Commission referred the case on charges of violating the Act on Fair Transactions in Subcontracting. Investigation Division 1 of the Seoul Central District Prosecutors' Office is handling it under the direction of the Fair Trade Investigation Department, led by Chief Prosecutor Na Hee-seok. Prosecutors continue to question Fair Trade Commission officials and other parties involved.

Meanwhile, Company A has claimed that when the Fair Trade Commission launched its probe in November 2023, DDB Worldwide moved swiftly to cut its losses by selling off its entire stake in DDB Korea the following month.