[Tracking Jeonse Fraud Reality]⑫ "Demanding Maximum Legal Sentence" Eradicating the Behind-the-Scenes Forces

As damages from jeonse fraud cases such as the 'Three Mothers Fraud,' 'Villa King,' and 'God of Villa' incidents continue to mount, calls for harsher punishments against fraudsters are growing louder. The government recently established a cooperative system involving the prosecution, police, and Ministry of Land, Infrastructure and Transport to cover the entire criminal process from crackdown to investigation and punishment, pledging a strict response to jeonse fraud crimes. In particular, for crimes causing multiple victims, the policy is to seek the 'maximum statutory penalty' to root out even the masterminds behind the scenes.

Korean courts have judged the guilt or innocence of landlords in jeonse fraud cases based on factors such as ▲deceptive acts to mislead others (tenants, etc.) ▲appropriation of property benefits ▲intentionality ▲and whether there was collusion.

Jeonse fraud crimes are generally punished under the criminal law's 'fraud' provisions. Article 347, Paragraph 1 of the current Criminal Act stipulates that "a person who deceives another to receive property or obtain property benefits shall be punished by imprisonment for up to 10 years or a fine of up to 20 million won." If the gain from a single crime exceeds 500 million won, it is recognized as 'fraud under the Act on the Aggravated Punishment of Specific Economic Crimes' and subject to enhanced punishment. Gains between 500 million and 5 billion won can lead to imprisonment for more than 3 years, and gains exceeding 5 billion won can result in life imprisonment or imprisonment for more than 5 years. However, the actual sentence is influenced by the 'sentencing guidelines' used to determine the defendant's sentence within the statutory range, considering factors such as prior criminal records and whether the victim has reached a settlement.

Attorney Choi Jisoo (head of Choi Jisoo Law Office) explained, "As a landlord, receiving a deposit by entering into a lease contract with a tenant despite having no intention or ability to repay, or deceiving about repayment plans, itself constitutes the deception element of fraud."

Landlords indicted on related charges often deny intent, claiming that "due to unforeseen circumstances such as rapid changes in the real estate market, they simply could not return the deposit." In November last year, the Suwon District Court Seongnam Branch Criminal Division 5 (Chief Judge Nam Insu) sentenced the CEO of a real estate rental company to 15 years in prison for fraud and other charges after defrauding 110 prospective villa tenants in the Gwangju area of Gyeonggi Province of about 12 billion won in jeonse deposits from 2016 to 2019. An order to confiscate 994 million won was also issued.

In this trial, the rental company CEO argued, "If there had been no collective lawsuits from the victims, funds would have circulated, making it possible to return the jeonse deposits," but was found guilty due to evidence of 'ponzi-like' repayment without any actual return plan. However, since fraud was established separately for each victim, the Act on the Aggravated Punishment of Specific Economic Crimes was not applied. The general fraud charge, which carries a maximum sentence of 10 years, allows the sentence to be increased up to one and a half times for multiple fraud offenses, making 15 years the maximum sentence in this case. Chief Judge Nam stated, "Considering that victims lost virtually all their assets worth about 100 million won each or incurred loan debts and continue to suffer economic hardship, a heavy sentence is necessary."

Depending on the type of jeonse fraud, charges of 'forgery of private documents' can also be applied. Typical cases include lending one's name for contracts or making side agreements that deceive about the nature of the property or the deposit amount. In such cases, the penalty can be imprisonment for up to 5 years or a fine of up to 10 million won. If a licensed real estate agent is involved, they can be punished under the 'Licensed Real Estate Agent Act' with imprisonment for up to 3 years or a fine of up to 30 million won.

On the 9th, the Suwon District Prosecutors' Office Criminal Division 1 (Chief Prosecutor Son Jinwook) arrested and indicted a licensed real estate agent and a no-capital gap investor on charges of defrauding inexperienced young adults in their 20s and 30s by purchasing a large number of so-called 'empty shell houses'?properties where the jeonse price is higher than the sale price?through no-capital gap investment. Family members who lent their names or signed jeonse contracts on behalf of others were also indicted without detention. The prosecution applied charges including fraud, forgery and use of forged private documents, and violation of the Licensed Real Estate Agent Act. This was because forged monthly rent contracts were submitted to financial institutions during the crime, and the licensed real estate agent was judged to have directly dealt with tenants in multi-family houses held under name trusts.

A gang that used empty shell houses in the Seoul metropolitan area for large-scale loan fraud was also recently sentenced to prison consecutively. The gang bought dozens of villas and one-room apartments, which were empty shell houses, with minimal down payments in 2018 and ran a real estate rental business. They were indicted for presenting forged lease contracts on these empty shell houses to deceive lenders into believing the collateral value was sufficient and receiving payments from borrowers who succeeded in obtaining loans.

In November last year, Judge Park Heegeun of the Seoul Central District Court Criminal Division 18 sentenced the gang leader to 7 years in prison for fraud and forgery and use of forged private documents. Nine other gang members, including the leader's wife who lent her name for business acquisition, were mostly sentenced to imprisonment. Judge Park pointed out, "They committed crimes such as fraud, forgery of private documents, and use of forged private documents by using real estate acquired through no-capital gap investment. Many victims suffered, and the extent of the damage is very large."

The problem is that, as in the case of the 'Villa King' who was found dead last October, even if victims file complaints, if the landlord dies, investigation and criminal punishment become impossible due to 'lack of prosecution rights.' Since suspicions have been raised that 'several Villa Kings were figurehead CEOs and that there are masterminds such as real estate consulting company representatives who incited them,' there is a strong demand for comprehensive investigation and punishment of accomplices.

Attorney Choi explained, "It is still possible to hold the deceased Villa King civilly liable, but if the heirs say they will only repay within the inherited property, actual repayment becomes difficult. However, accomplices can be held jointly and severally liable for joint torts. This means that regardless of the share ratio, each is responsible for the entire amount of damages and must compensate."