Endless Jeonse Fraud... Tens of Billions Embezzled Without Capital [Economic Crime 24 Hours]

Famous One-Room Building Acquired Without Capital... 5 Billion Won 'Swallowed'
22 Office-tels in the Seoul Metropolitan Area with 'No-Capital Gap Investment'

Kim Sian (31, pseudonym), an office worker at a company in Cheonan, Chungnam, was recently preparing to move after her jeonse lease ended when she was shocked. She had planned to move to a slightly larger home by combining the money she had saved over two years with her existing jeonse deposit, but she found out that she could not get her deposit back. With the situation urgent, Kim repeatedly tried to contact the building landlord but was unable to reach them, eventually filing a complaint with the police. It turned out that Kim was not alone; many tenants who suffered similar damages had visited the police station.

The first complaint from tenants of this building was filed at the Cheonan Seobuk Police Station in Chungnam on August 16 last year. Since then, complaints continued to be filed, with victims emerging until June 11 of this year. There were 62 victims identified, with damages amounting to 5 billion KRW. Upon realizing that the victims all lived in the same building, the police imposed a travel ban on the landlords Lee (46) and Kim (51) and launched a full-scale investigation. The police summoned and interrogated the two.

According to the police investigation, Kim established a paper company in January 2019, appointing himself as the representative and Lee as the deputy head, and purchased the one-room building. They did not invest a single won in this process. They acquired the building through a so-called ‘zero-capital purchase,’ taking over the bank debt secured on the building as is.

After successfully acquiring the building, the two signed lease contracts with tenants from January 21, 2019, to March 28 last year, and misappropriated the deposits received. The deposits lost due to their criminal method ranged from 50 million KRW to as much as 110 million KRW per victim.

Recognizing the severity of the case, the police arrested Kim and Lee on May 24 on charges of fraud under the Act on the Aggravated Punishment of Specific Economic Crimes (Special Economic Crimes Act) and sent them to the prosecution on May 28. Normally, fraud carries a sentence of up to 10 years imprisonment or a fine of up to 20 million KRW, but if the amount obtained by fraud exceeds 500 million KRW, the Special Economic Crimes Act applies, mandating a prison sentence of at least three years without a fine. Their first trial is currently underway at the Cheonan Branch of the Daejeon District Court.

A similar case was reported to the Bucheon Wonmi Police Station in Gyeonggi Province in April this year. The case originated from a jeonse fraud at an officetel in Wonmi-gu, Bucheon. After receiving complaints that the landlord was not returning deposits, the police requested information from the Ministry of Land, Infrastructure and Transport and confirmed that the landlords had purchased a total of 22 officetels in Bucheon as well as in Hwagok-dong, Gangseo-gu, Seoul, and Bupyeong, Incheon.

Suspecting a zero-capital gap investment scheme, the police contacted tenants directly to assess the damage and launched a full investigation. The damages ranged from 100 million KRW to as much as 200 million KRW per person, totaling 2.7 billion KRW. However, the landlord disappeared immediately after the complaint was filed, making the initial investigation difficult. The police obtained arrest and communication warrants from the court and began tracking, but it was not easy to find the landlord who showed no signs of life.

During the investigation, the police identified a licensed real estate agent in their 30s who had assisted the landlord’s fraudulent activities and pressured them, which led to the landlord surrendering to the police in January this year. The landlord and the real estate agent were friends and had also purchased buildings through zero-capital gap investment. Ultimately, the landlord was detained, and the real estate agent was sent to prosecution without detention. At the first trial held at the Bucheon Branch of the Suwon District Court, the court sentenced both to prison terms.