Jeonse fraudster who swindled W18b sentenced to 12 years in prison

A court sentenced a man in his 50s to 12 years in prison and a fine of 1 million won for carrying out a jeonse fraud scheme worth 18 billion won ($13 million).

The 13th Criminal Division of the Seoul Northern District Court, presided over by Judge Na Sang-hun, on Thursday sentenced the man, identified only by his surname Kim, to 12 years in prison and a fine of 1 million won. Kim had been indicted on charges of violating the Act on the Aggravated Punishment of Specific Economic Crimes, forging private documents, and using forged documents.

According to prosecutors, Kim defrauded 154 victims out of 16.28 billion won in jeonse deposits by refusing to return the deposits after lease agreements expired. He also faces charges of forging 139 lease contracts to fraudulently obtain loans totaling 2.04 billion won.

A significant number of the victims were students from universities in the Dongdaemun-gu area of Seoul, including Kyung Hee University and Hankuk University of Foreign Studies.

The court said the scheme operated as a "Ponzi-style funding structure" in which Kim used deposits obtained through new loans and jeonse contracts to repay existing tenants. "Kim used funds borrowed with forged documents to keep the scheme going, and continued signing lease agreements without disclosing unauthorized changes of use or illegal expansions of units," the court said.

The court added that it was reasonable to conclude Kim had knowingly committed fraud, citing the onset of delinquencies on financial institution loans and the apparent absence of liquid assets — such as cash or bank deposits separate from real estate — with which to return deposits.

Kim had argued at trial that he lacked criminal intent during certain periods when, in light of his financial situation and real estate values, he had the capacity to repay. The court rejected the argument and found him guilty on all charges.

"Kim denied the charges with explanations that are difficult to accept, failed to make restitution for a substantial portion of the damage, and has not been forgiven by most of the victims," the court said in explaining the sentence. "A significant number of the victims were college students or young people just entering the workforce, and they appear to have suffered considerable psychological harm in addition to financial losses."

Some deposits were partially recovered through the sale of Kim's properties and court-ordered auction proceedings, but the amounts fell short of the actual damages. The court gave those recoveries only limited weight in sentencing, finding they could not be regarded as the result of voluntary efforts at restitution.

Kim's older sister, who was indicted on charges of aiding and abetting the fraud, received a two-year suspended sentence with a three-year probation period.

According to prosecutors, 12 victims suffered losses of 1.52 billion won as a result of her facilitation of the scheme. The court found that she had acted with reckless disregard — aware that her brother's conduct might constitute fraud.