Supreme Court Confirms 20-Year Prison Sentence for AhsSeven CEO in 1 Trillion Won Investment Fraud Case

Virtually 'Investment Fund Recycling'
Approximately 1.2 Trillion KRW Embezzled Over 6 Years

[Asia Economy Reporter Choi Seok-jin, Legal Affairs Specialist] The guilty verdicts of the CEO and executives of the cosmetics company Ash Seven, who defrauded over 7,000 victims of approximately 1 trillion KRW through a multi-level marketing scheme, have been confirmed.

According to the legal community on the 22nd, the Supreme Court's 2nd Division (Presiding Justice Min Yu-sook) recently upheld the original sentence of 20 years imprisonment for Ash Seven CEO Eom Mo (59), who was detained on charges of fraud under the Act on the Aggravated Punishment of Specific Economic Crimes, violations of the Act on the Regulation of Terms and Conditions and the Door-to-Door Sales Act. The fine of 1 billion KRW imposed on Ash Seven as a corporation under the joint penalty provision was also confirmed.

Supreme Court, Seocho-dong, Seoul.

Regarding Eom’s appeal on the grounds of excessive sentencing, the court stated, "Considering various factors that affect sentencing, such as the defendant’s age, character, environment, the motive, means, and results of the crime, and circumstances after the crime, even taking into account the reasons cited in the appeal, it cannot be said that the first-instance court’s decision to sentence the defendant to 20 years imprisonment was grossly unfair," thus dismissing the appeal.

Along with Eom, seven regional headquarters chiefs who were sentenced to prison terms ranging from 2 to 11 years in the second trial, and four others including the Ash Seven vice chairman and directors who received suspended sentences in the second trial after being sentenced to imprisonment in the first trial, had their sentences upheld as originally decided.

The court added, "There was no error in the original court’s judgment regarding the failure to conduct necessary hearings, violation of the rules of logic and experience, exceeding the limits of free evaluation of evidence, or misapplication of legal principles related to fraud under the Act on the Aggravated Punishment of Specific Economic Crimes and general fraud, including deception, intent to defraud, calculation of defrauded amounts, establishment of conspiracy, specification of charges, legal errors, or proof of crime."

Eom and others are accused of deceiving over 7,000 victims from July 2015 to August 2021 by promising "a 5% interest on investment funds over four months and returning the principal in the fifth month," thereby embezzling about 1.2 trillion KRW.

They operated the company using a Ponzi-like scheme, paying promised dividends to existing investors with funds from new investors. In particular, they fabricated the appearance of a successful cosmetics company by making it seem as if a famous celebrity was the model for the company’s cosmetics.

When new investors decreased, starting around May 2019, they developed new investment products to continue their fraudulent activities, deceiving investors with claims such as "to receive the principal, you must pay a membership fee and join a cooperative," or "Ash Seven is planning to go public, so if you purchase preferred shares, you will receive double the shares and be paid principal and profits," thereby embezzling investment funds.

After Ash Seven’s planned listing was canceled in January 2021, they again deceived investors by claiming they planned to participate in a paid-in capital increase of a KOSPI-listed company, attracting additional investments and embezzling funds.

In October 2021, the police transferred 63 suspects to the prosecution, but the prosecution ultimately indicted 13 individuals.

The first trial court stated, "The defendant, as the representative, planned and led the crime in an organized manner and, despite having no prior similar offenses, requires severe punishment. Using a multi-level marketing organization and a Ponzi scheme, he caused numerous victims, whose damages led to family breakdowns and serious social harm," sentencing Eom to 20 years imprisonment.

The appellate court noted, "Eom was at the pinnacle of the criminal acts in this case," and pointed out, "Although operating through a so-called Ponzi scheme, he gave interviews to the media to make the company appear to be operating normally, causing many victims," dismissing Eom’s appeal.

Additionally, the appellate court stated, "Although some victims submitted petitions not to punish, considering the enormous amount embezzled in this case, there is no reason to change the original sentence," and also dismissed the appeals of the other defendants.