Empty Can Jeonse, 5.4 Billion Won Embezzled from 77 Tenants... Daegu Police Arrest One Person

On the 13th, the Daegu Southern Police Station arrested Mr. A on charges of fraud for embezzling 5.4 billion KRW in rental deposits from 77 tenants after leasing so-called ‘Kkangtong Jeonse’ (empty-can Jeonse).

According to the police, Mr. A purchased six villa buildings in the Nam-gu, Seo-gu, and Dalseo-gu areas of Daegu from around 2015 to 2019 using a ‘no-capital gap investment’ method. He is accused of using the deposits received from tenants for loan interest, taxes, and living expenses, and employing a scheme of rolling over rental deposits, ultimately failing to return the deposits to the tenants.

No-capital gap investment refers to a real estate transaction method where tenants are involved, and the Jeonse deposit is set higher than the purchase price to cover the transaction amount. When ‘Kkangtong Jeonse’ occurs?where the Jeonse deposit is higher than the actual transaction price?if the landlord cannot find a subsequent tenant or if the Jeonse price falls, the landlord cannot return the deposit, and the tenants bear the full loss.

Mr. A also exploited the fact that tenants must obtain the landlord’s consent before the lease contract to check the status of senior-ranking deposits, deceiving victims by falsely notifying them of the senior-ranking deposit status. It was also found that he did not enter into contracts with tenants who requested to verify the senior-ranking deposit status.

Daegu Police Agency

After receiving reports from victims who could not recover their deposits in early February, the Daegu Southern Police Station launched an investigation, secured key evidence to prove the charges, apprehended the suspect who was previously at large, and arrested him. The investigation will be expanded to determine whether there are real estate agents involved in the crime.

The police advised that, unlike apartments or single-family houses, in the case of multi-family housing, when signing a lease contract, tenants should obtain the landlord’s consent to provide information on senior-ranking deposits, verify the status of senior-ranking deposits, and insert special clauses in the contract allowing immediate termination if false information about senior-ranking deposits is provided after the contract is signed.

From July last year, the Daegu Police Agency conducted a ‘Jeonse Fraud Special Crackdown’ for seven months, resulting in the crackdown on 103 individuals in 65 cases, with 60 people sent to the prosecution.