Without Breach of Trust, Can "Corporate Rental Deposit Fraud" Be Punished? [Invest&Law]

If the Government and Ruling Party Abolish Breach of Trust under the Criminal Act,
Punishment Gaps Will Emerge in Corporate Villa King Cases
Fraud Charges Alone Cannot Cover Embezzlement and Misappropriation of Deposits
Prosecution Becomes Diffic

There are growing concerns that the government's and the ruling party's push to abolish the crime of breach of trust under the Criminal Act could create a gap in prosecution for the so-called "corporate villa king" cases, which have shaken the nation for years. This is because, in large-scale rental deposit frauds involving dozens or even hundreds of properties owned by corporations, the charge of occupational breach of trust could disappear, leaving only fraud charges, which may not fully cover such cases.

According to the legal community on November 18, recent large-scale rental deposit fraud cases-such as the Suwon family rental scam (with damages of 76 billion won), the "construction king" rental scam in Michuhol-gu, Incheon, and the corporate-type rental business scam involving 165 properties in southern Gyeonggi Province (worth approximately 35.4 billion won)-have all involved the application of occupational breach of trust. In each of these cases, hundreds of properties were owned under the name of a rental corporation, and tenants' deposits were received into corporate accounts or were otherwise structured through the corporation.

Corporate representatives diverted the deposits received into corporate accounts for purposes unrelated to the corporation’s objectives, such as land investment, solar power businesses, personal living expenses, or cash advances on credit cards. In these cases, those entrusted with managing the corporation’s assets-effectively handling others’ affairs-were implicated in rental deposit fraud. Until now, prosecutors have applied not only fraud charges but also occupational breach of trust in such situations.

Misappropriation of funds and deposits within the corporation cannot be fully prosecuted under fraud charges alone, making it necessary to also apply occupational breach of trust for effective punishment. A prosecution official stated, "Breach of trust is the core charge for cases involving the misappropriation of hundreds of billions of won in corporate assets. If this charge is removed, it will become difficult to indict even half of the crimes in corporate-style rental deposit fraud cases." Kim Mina, Chief Prosecutor at the Mokpo Branch of the Gwangju District Prosecutors’ Office (34th class), wrote on the internal prosecution network, "If breach of trust is abolished, we will no longer be able to address cases previously prosecuted as breach of trust, such as when a rental management company collects additional rent without the landlord’s knowledge or fails to return deposits in rental fraud cases."

For this reason, the legal community believes that abolishing the breach of trust charge will inevitably weaken the ability to respond to rental deposit fraud crimes. In particular, they point out that it will also limit investigative capacity to uncover the substantive truth behind "corporate-centered rental deposit fraud" cases, which often involve hundreds of victims and damages amounting to hundreds of billions or even trillions of won.