63 Billion Won Jeonse Fraud: Prosecutors Seek 12-Year Prison Term for Former Senior Busan Official

When Collateral Loans Were Blocked, Lease Contracts Were Forged
Fraudulent Loans Totaling 4.78 Billion Won from Financial Institutions

Prosecutors have requested a 12-year prison sentence for a former senior official of Busan Metropolitan City, who orchestrated a large-scale jeonse (long-term deposit lease) fraud scheme worth approximately 6.3 billion won using a zero-capital gap investment method.

Yonhap News

At the sentencing hearing held on August 26 in the 6th Criminal Division of the Busan District Court (presiding judge Kim Yonggyun), prosecutors asked the court to sentence a man in his 70s, identified as Mr. A, to 12 years in prison on charges including violation of the Act on the Aggravated Punishment of Specific Economic Crimes (fraud). Prosecutors explained the reason for their sentencing request, stating, "The defendant's jeonse fraud resulted in numerous victims, with the total amount involved reaching 11 billion won."

Mr. A is a former high-ranking official who served as deputy district head of a local government in Busan, a director-general at the city government, and chairman of a public institution under the city. After leaving public office, he entered the real estate leasing business. From September 2019 to May 2023, he is accused of failing to return a total of 6.35 billion won in deposits to 75 victims, despite lacking the ability to do so, after signing lease contracts for 73 units in nine multi-family residences he owned.

Mr. A purchased officetels and other multi-family residences in six areas of Busan using the gap investment method and operated his rental business by rolling over deposits from new tenants. He deceived victims by promising to return their deposits immediately upon contract expiration. During the contract process, he reassured victims by flaunting his ownership of multiple buildings and emphasizing his background as a former senior public official. Most of the victims were women in their 20s and 30s who were just starting their careers, and it was confirmed that they secured deposits ranging from as little as 70 million won to as much as 130 million won through jeonse loans.

In November 2021, as the amount of unpaid deposits increased and he faced financial difficulties such as loan interest payments, Mr. A attempted to take out loans using his officetels as collateral.

However, as the debt on the officetels exceeded their market value and the collateral became worthless, making loans impossible, he obtained fraudulent loans by submitting forged lease contracts.

He increased the collateral value by, for example, altering a jeonse lease contract with a deposit of 126 million won into a monthly rent contract with a deposit of 20 million won and a monthly rent of 600,000 won. Using such methods, lease contracts for 60 units in two buildings he owned were forged, and he obtained a total of 4.78 billion won in loans from financial institutions.

At the sentencing hearing, Mr. A's attorney stated, "The defendant admits to and is remorseful for the crime," and added, "In November 2021, as jeonse fraud became a social issue, tenants simultaneously requested the return of their deposits upon contract expiration." The attorney further appealed for leniency, saying, "The fraudulent loan amounts were used to repay damages and loan interest, and some victims have recovered part of their deposits."

Mr. A stated, "If bail is granted, I will do whatever it takes to ensure there is no loss to the victims." The sentencing hearing is scheduled for September 26.