[Tracking Jeonse Fraud Reality]⑨ The Fraud Drama of the Construction King of ‘Nahollo Apartment’ in Michuhol-gu, Incheon

34 out of 60 Households at Dohwa-dong D Apartment Auctioned
Family and Friends Victims of Jeonse Fraud Side by Side
Landlord, Broker, Building Management Company CEO
51-Person Fraud Role Play

[Asia Economy Reporter Kim Min-young] Among the total 60 households in D Apartment in Dohwa-dong, Michuhol-gu, Incheon, all 34 households have been auctioned off. The scale of the deposit damage is approximately 3 billion KRW. Lee (30), who serves as the head of the victims' association in this complex, said that in August 2020, he scraped together 60 million KRW in loans and his own money to sign a jeonse contract with a deposit of 80 million KRW. However, in October last year, he received a notice from the court that the building was under auction proceedings.

Most households in D Apartment in Michuhol-gu, Incheon, which were affected by jeonse fraud, have been auctioned off. (Provided by Michuhol-gu Jeonse Fraud Damage Countermeasures Committee)

"We gathered the affected tenants and created a KakaoTalk group chat, and looking at the profiles of the participating tenants, many had wedding photos and had not passed D+100 days. This means that many of the affected households were newlywed couples who had been married for only a short time."

Lee, speaking slowly with a gaunt appearance unable to even shave his beard, revealed that his younger brother, who rents a villa in Juan-dong, is also a victim of jeonse fraud. Lee's younger brother is also at risk of losing a deposit exceeding 80 million KRW. "Among the victims in our apartment complex, there are parents who fell victim to jeonse fraud, and friends living in the mixed-use complex just across the street who suffered the same fraud," Lee said. He added that it is not difficult to find family, relatives, or acquaintances living in Michuhol-gu who have fallen into the trap of jeonse fraud like himself.

◆Why are jeonse fraud villas concentrated in Michuhol-gu? = Why has jeonse fraud occurred so frequently in Michuhol-gu? Michuhol-gu is a representative old downtown area of Incheon with a strong image of being underdeveloped and stagnant. New constructions are rare there.

Messages exchanged between Mr. Lee, a victim of the Jeonse fraud at M Apartment, and the landlord. (Provided by Mr. Lee)

According to local real estate agents in the area, the so-called "Construction King" Mr. A (61), identified as the mastermind behind the jeonse fraud in Michuhol-gu, focused on purchasing low-rise buildings of 2 to 3 floors located along the roads of Gyeongin-ro and Hannaru-ro. Since this area is zoned as a general commercial district where residential facilities like apartments cannot be built, he constructed mixed-use complexes with officetels on the lower floors and villas on the upper floors. Using the deposits from tenants and loans secured by the leased buildings as capital, he built new buildings and reinvested the deposits from those into other buildings, thereby increasing the number of properties he owned.

M Apartment, D Apartment located within a 5-minute walk, S Apartment facing D Apartment across the street, and E Apartment and O Apartment within a 15-minute walk?all these standalone buildings experienced simultaneous jeonse fraud incidents. The total number of households under auction in these five buildings is 274.

Lee Eun-hyung, a research fellow at the Korea Institute of Construction Policy, explained, "Officetels are legally classified as commercial real estate, so the mixed-use complexes were built by meeting the commercial real estate ratio (40%) with officetels and creating apartment-style residential spaces on the upper floors, which were then leased out."

The reason why many victims in this area are in their 20s and 30s is that the Juan National Industrial Complex exists in Gajwa-dong, Seo-gu, Incheon, providing abundant demand. The Juan National Industrial Complex is a large-scale industrial complex with roughly over 10,000 workers, but there are few housing options for young people nearby. The choices are either newly built apartments or old villas without elevators. There is also a severe shortage of stable housing facilities supported by the government or Incheon city. According to the Incheon Economic Industry Information Technopark, only 326 workers were selected for the 'Incheon Juan Industrial Complex Worker Dormitory Support Project,' jointly supported by Incheon city and the Ministry of Employment and Labor as of 2022. Construction King Mr. A’s new buildings exploited this gap.

A representative from B Real Estate Agency in Dohwa-dong, Michuhol-gu, said, "New apartments in the nearby Dohwa Residential District are priced over 300 million KRW, and most other buildings are old villas, making Michuhol-gu a place with stark residential polarization," adding, "There is high demand for new villas among young people and newlyweds."

For example, a 74㎡ unit in The Sharp Incheon Sky Tower 1st Complex in Dohwa-dong, Michuhol-gu, was sold for 459 million KRW last December. Even if one arranges funds through loans, at least 200 million KRW in seed money is needed to consider this housing.

"Our generation, lacking capital, cannot even dream of such places," Lee bitterly said. Among the 14 households that signed jeonse contracts in D Apartment, only two had no loans. The average jeonse deposit in D Apartment is around 80 million KRW.

Kim (36), a victim of jeonse fraud in D Apartment, said, "New apartments in the Dohwa Residential District are difficult to enter due to financial burdens, and since loans are necessary anyway, we decided to come to this newly built place adjacent to the roadside by taking on an additional 10 to 20 million KRW in debt."

◆One person playing three roles in the jeonse fraud... 51 accomplices = It is rare for an entire building with at least 30 households to be auctioned off at once. This indicates that the jeonse fraud was organized and involved many accomplices. According to the Incheon Police Agency, 51 accomplices are under investigation for their involvement in Construction King Mr. A’s fraudulent activities. They disguised themselves as real estate agents, became landlords of specific buildings, or pretended to be representatives of building management companies. Since properties with mortgages are difficult to trade and real estate agencies avoid handling such listings, they even acted as real estate agents themselves to lure victims. For those reluctant to sign contracts due to mortgages exceeding 120 million KRW, they presented compensation certificates promising up to 100 million KRW in case of contract-related issues.

Asia Economy analyzed the registration certificates, lease contracts, and management fee notices of the victim apartments provided by the Michuhol-gu Jeonse Fraud Victims Countermeasure Committee. It was found that Mr. Kim**, listed as a landlord, appeared as an assistant broker in contracts mediating nearby buildings. He was also the representative of the company registered as the comprehensive housing management company for O Apartment. Furthermore, Mr. Lee**, the representative of H Housing Management Company for C Apartment, which is under auction, acted as an agent during the mediation of C Apartment and is also listed as a landlord in the contract for E Apartment, which is also notorious for jeonse fraud.

There is another clue indicating the same perpetrator committed the fraud: the shared entrance password. Yoon (36), who realized he was a victim of jeonse fraud in September last year, works as a delivery courier. Whenever he delivered to newly built villas along Gyeongin-ro, he tried the shared entrance code of his own building on other buildings. The code 79** opened the door of F Apartment, where jeonse fraud occurred. Through communication with victims of F Apartment, he learned that the building management company of his own apartment and that of F Apartment is the same H company. Tenants consider them effectively the same organization. Currently, 92 households in F Apartment are under auction.

Even a loan officer from K Bank, a first-tier financial institution, was found to be involved in the fraud. Yoon said, "In August 2018, after working as an expatriate in Vietnam, I returned to Korea on a one-week vacation and urgently needed a place to live. A real estate agent accompanied me to K Bank in front of Juan Station, where I bypassed the queue and went directly to a specific employee's counter to get loan approval."

When Yoon revisited the bank in 2020 to extend his jeonse loan, the employee who had processed his loan had already left. If Yoon's claim is true, financial brokers also joined in the jeonse fraud. K Bank responded, "The employee in question is no longer working here."