"Profitable Even When Scamming"... Unable to Compensate or Reclaim, Cry Twice in Court [Old Dive into 'Coin Fraud']

③(Part 2) Reduced Sentences and Concealment of Criminal Proceeds through Hiring Former Prosecutors
Repeated Recidivism in Similar Fraudulent Investment Schemes after Release
‘Protecting Criminal Proceeds Means Winning’ Formula Prevails
Need to Break the ‘Profitable Even When Cheating’ Structure

Editor's NoteThe Ado International coin scam, known as a "4.4 trillion won Ponzi scheme," is considered a textbook example of multi-level marketing crimes in South Korea. A total of 36,000 people were defrauded, with a significant number of elderly victims. In July, the main perpetrator, Mr. Lee, received an encouraging sentence of 15 years, the maximum penalty for fraud. In response, this publication conducted morphological analysis on 126 handwritten petitions for severe punishment sent by Ado International scam victims to the Seoul Central District Court. We aim to take an in-depth look at the specific and individual suffering that "quasi-deposit and multi-level marketing scams," frequently featured in newspaper headlines, bring to victims' lives. We also examine the issues of recovering criminal proceeds and confiscation across various levels.

"Elderly and other financially vulnerable groups → lower-level recruiters → upper-level recruiters and main perpetrators → multi-level marketing specialist lawyers."

This is the common "flowchart of criminal proceeds" described by complainants who have faced quasi-deposit scams like Ado International in court. Money moves along the arrows. Multi-level marketing recruiters, tightly organized in a pyramid structure, spread nationwide from the headquarters established by the main perpetrator. They are assigned ranks from Level 1 to Level 5 according to their order of involvement. They lure elderly people with promises of high returns to gather funds. Then suddenly, withdrawals are blocked. One by one, victims realize the fraud. The main perpetrators and recruiters are brought to trial.

The problem starts here. In court, the "state's criminal jurisdiction" over multi-level marketing scams is structured in a way that makes strict punishment and retributive justice difficult to enforce.

They hire ultra-luxurious former high-ranking lawyers with enormous criminal proceeds to obtain acquittals or reduced sentences. In the case of Ado International, the fraud scale reached 440 billion won, with 36,000 victims. However, due to the nature of crimes targeting ordinary citizens, it is rare for an individual's loss to exceed 500 million won, so the Act on the Aggravated Punishment of Specific Economic Crimes does not apply. The same applies to the confiscation of criminal proceeds recovered by the state treasury. Compensation order applications are rarely accepted. Confiscations are dismissed. Many victims are elderly or low-income. It is difficult for them to file civil lawsuits due to expensive attorney fees and lengthy processes. Fraudsters exploit this gap. They change lawyers to delay trials. If they use skilled lawyers to get reduced sentences or acquittals in criminal courts, that's enough. After release, they orchestrate similar scams under different guises such as "coin," "planned real estate," "voice phishing," or "stock leading." Vulnerable groups like the elderly or low-income people in urgent need of cash become prey again. This is how "fraud remains profitable" and thrives.

A petition written by victims of the Ado International coin scam urging for confiscation and compensation.

Here, hiring a skilled former high-ranking lawyer becomes key. Attorney Lee Jong-geun, who received a "black belt" awarded to first-class certified prosecutors specializing in multi-level marketing and quasi-deposit cases during his prosecutor days, stirred controversy over "legal ethics" after receiving 2.2 billion won for taking on the "Hustem Korea 1 trillion won multi-level marketing scam" case. He resigned following the controversy over the high fees. A lawyer who mainly represents coin scam complainants said, "This is a common occurrence in court," adding, "It depends on the lawyer's personal philosophy and conscience."

The Ado International coin scam petitions also contained many appeals urging "confiscation" and "compensation order applications." Statements such as "We are drowning in credit card debt, while defendants hire luxury lawyers, receive medical bail, and are released," "Confiscated funds are the lifeline for victims," and "Please do not dismiss compensation orders" were common.

Expectations for Criminal Compensation and Confiscation but Lack of Manpower... High Recidivism Means "Fraud Remains Profitable"

Why are confiscation and compensation difficult? In 2019, as the number of victims of crimes targeting ordinary citizens increased, the National Assembly amended the Act on the Forfeiture of Corrupt Property, which had been in effect since 2008 and limited to embezzlement and breach of trust crimes, to expand its application to include ▲organizing criminal groups to commit crimes ▲deceptive quasi-deposit and multi-level marketing methods ▲specific fraud crimes such as voice phishing. The purpose was to enable the state to recover and return assets embezzled by criminals even if victims do not file civil lawsuits against them.

However, in actual courtrooms, this system has become virtually obsolete. On July 9, Judge Kim Ji-young of Criminal Division 25 at Seoul Central District Court dismissed all confiscation requests made by the prosecution against main perpetrator Mr. Lee (24.7 billion won), Mr. Jang (762.61 million won), the IT manager Mr. Lee (30 million won), and IT assistant Mr. Kang (139 million won) in the first trial of the Ado International case. The court stated, "There is no clear circumstance indicating that victims find it extremely difficult to take civil measures for damage recovery, and some victims have received daily allowances or other profits, which they have cashed or reinvested, so the embezzled amount stated in the criminal facts appears to be less."

Earlier, in a similar ruling related to the 100 billion won multi-level marketing "MBG case" investigated in 2019, the prosecution claimed under Article 5 of the Act on the Forfeiture of Corrupt Property that the chairman Mr. Lim could be confiscated of criminal proceeds obtained through habitual fraud. The court dismissed the claim, stating, "It is difficult to confirm how much money ultimately belonged to the defendant, so confiscation of criminal proceeds under the Act cannot be ordered." Compensation order applications have also seen a sharp decline in acceptance rates amid this trend. According to the Supreme Court, from January to September this year, courts nationwide accepted 10,131 compensation order applications, a 27.3% acceptance rate out of 37,165 total applications. This is a continuous decline from 41.2% in 2019 and 35.0% last year.

Criminal Courts Busy Debating Guilt or Innocence, Leading to Dismissals and Confiscation Rejections... Increasing Fraud Cases

Legal circles analyze that criminal courts are so busy determining defendants' guilt or innocence that dismissals of compensation order applications and confiscation rejections are becoming precedents. "Multi-level marketing organization fraud" is also difficult to specify criminal proceeds. The court must examine deposit and withdrawal records of tens of thousands of victims, but criminal courts lack the justification, manpower, and capacity to do so. If some investment returns enter accounts, it becomes harder to clearly calculate damages. Even if compensation orders are accepted based on damage calculations, if disputes arise between complainants and defendants, civil lawsuits challenging the orders could flood the courts.

The problem is that in multi-level marketing organization fraud, the formula "hire former high-ranking lawyers" and "protect criminal proceeds to win" is widely accepted. Recidivism is frequent. Mr. Jang, an upper-level recruiter for Ado International who was sentenced to 10 years in prison in the first trial, was found to be on trial for a similar fraud case while being prosecuted for violating the Act on the Aggravated Punishment of Specific Economic Crimes related to quasi-deposit acts.

Experts advise that structural reforms are necessary to break the system where "fraud remains profitable," which would reduce livelihood scams targeting vulnerable groups such as the elderly. Kim Kyung-hwan, representative attorney of Minhoo Law Firm, stated, "Criminal law is about exercising state penal power, and civil law aims at damage recovery between parties, so there needs to be legal-theoretical consideration about whether expanding criminal judicial procedures through compensation and confiscation is appropriate." He added, "Because multi-level marketing scams have similar accomplice structures and scam directions, it is necessary to clarify regulations so that systems preventing and supplementing these damages do not become ineffective." Kim Dae-geun, director of the Korea Institute of Criminal Justice Policy, said, "It is necessary to explore various methods such as disclosing habitual fraudsters' identities to urge debt fulfillment." Attorney Seo Aram of SC Law Firm said, "If professional investigators are assigned to calculate damages in fraud trials, the acceptance rate of compensation orders could relatively increase."