"Offering Cheap Apartment Sales" - 6 Billion Won Housing Association Fraud Gang Indicted

Seoul Northern District Prosecutors' Office.

[Asia Economy Reporter Jeong Dong-hoon] A group that deceived people who wanted to become regional housing association members by promising to sell apartments at low prices and collected 6 billion KRW in association membership fees has been brought to trial.

The Construction Crime Criminal Division of the Seoul Northern District Prosecutors' Office (Chief Prosecutor Park Ha-young) announced on the 5th that it has indicted without detention 11 individuals involved in the regional housing association project in Jeonnong-dong, Dongdaemun-gu, Seoul, including A (59), the president of a business agency, and B (64), the president of a service company, on charges of fraud and breach of trust.

Eight people, including former and current regional housing association promotion committee chairs and representatives of member recruitment agencies, are accused of conspiring from the recruitment process to deceive about the project status (fraud). From November 2015 to July 2020, they misrepresented the land acquisition rate, district unit plan approval rate, and conditions of the scheduled construction company, falsely promising to sell apartments at low prices, and embezzled a total of 6 billion KRW from 125 victims under the pretext of association membership fees and other charges.

Investigations revealed that they neither actually established the regional housing association nor obtained the necessary project approvals. They also failed to properly secure the land for apartment construction.

According to the prosecution, A and B conspired with four others, including former and current regional housing association promotion committee chairs and executives of the business agency, and from December 2015 to June 2018, B’s service company collected 1.5 billion KRW in recruitment fees despite not recruiting any members. Additionally, seven people, including another business agency representative, embezzled 1.2 billion KRW from the association as service fees from January 2017 to December 2019, even though no project management (PM) services were performed.

B used the money obtained in this way, along with corporate funds from his service company, to spend 4.36 billion KRW on repaying personal debts and purchasing luxury goods. A is additionally charged with breach of trust for causing a total loss of 2.5 billion KRW to the promotion committee. In November 2015, he evaluated a fictitious real estate development project as if it had business rights and transferred it to the promotion committee for 1.5 billion KRW.

Furthermore, from February to July 2016, to raise funds for other projects unrelated to the association, he arbitrarily offered discounted membership contracts to creditors, causing a total loss of 1 billion KRW to the promotion committee.

The prosecution explained that the key defendants A and B were able to conceal their crimes for a long time by using methods such as appointing nominal representatives for service companies or business agencies and using nominee accounts.

The prosecution stated, "Most regional housing association members are either homeless or own small homes, and this large-scale damage exploited the feelings of ordinary people trying to secure their own homes. We will strive to recover the criminal proceeds so that the victims’ property can ultimately be returned to the association members."