'Construction King' Arrested in Incheon for 12.6 Billion Won Jeonse Fraud... 163 Apartment Units Affected

Police Reapply for Warrants and Detain... 58 Accomplices Including Licensed Realtors Remain Free
Defense Attorney States "Repayment Made Using Company Assets and Defendant's Personal Funds"

[Asia Economy Reporter Park Hyesook] A construction contractor accused of embezzling 12.6 billion KRW in jeonse deposits from 163 apartment and villa units has been arrested by the police.

The Metropolitan Investigation Unit of the Incheon Police Agency announced on the 20th that they have arrested construction contractor A (62) on charges of fraud and violation of the Act on Real Name Registration of Real Estate, among other charges.

Judge Kim Jinwon of the Incheon District Court, who was in charge of the warrant, conducted a pre-arrest interrogation (warrant review) of A on the 17th and issued an arrest warrant citing "risk of flight."

The police also booked 58 accomplices, including licensed real estate agents, nominal leaseholders, and brokerage assistants, without detention on the same charges.

A and others are accused of embezzling 26.6 billion KRW in jeonse deposits from tenants for 163 apartment and villa units in the Michuhol-gu area of Incheon between January and July of last year.

Investigations revealed that despite worsening financial conditions and the possibility of the apartments or villas being auctioned off, they recklessly entered into jeonse contracts. Even though mortgage loan interest and various taxes were overdue, making it impossible to return the jeonse deposits upon contract expiration, they maintained the contracts by raising the deposits by tens of millions of KRW, according to the police.

This is the second time an arrest warrant has been requested for A. Previously, in December last year, the police applied for arrest warrants for A and B (female), a licensed real estate agent, among a group of five, but the court dismissed the request, stating there was room for dispute over whether deceptive acts occurred.

After conducting supplementary investigations, the police reapplied for arrest warrants for A and B, but the court again dismissed B’s warrant. Three other accomplices admitted to related charges during the investigation and were excluded from warrant applications.

Initially, the police stated in the arrest warrant that A and others embezzled 26.6 billion KRW in jeonse deposits from 327 apartment units between March 2021 and July last year, but narrowed the scope of the crime in the warrant reapplication.

The police originally considered March 2021 as the start of the crime, when A began defaulting on national and local taxes and notified employees to raise jeonse deposits due to poor financial conditions. However, in the reapplication, the start date was changed to mid-January last year, when the houses rented out by A began to be sequentially auctioned.

Apartments in Michuhol-gu, Incheon, with a surge in jeonse fraud victims [Image source=Yonhap News]

The police also refuted A’s claim during the previous warrant review that he had a plan to repay the damages.

A had stated he would proceed with repayment by selling his owned buildings and land, but the police explained that these properties were either subject to auction or had been transferred to a trust company, making sale impossible.

According to the police investigation, A began purchasing houses over ten years ago, borrowing names from acquaintances to build new apartment and villa buildings, then using the jeonse deposits and mortgage loans to construct more apartment units, thereby expanding his real estate holdings.

A owns a total of 2,700 housing units in Incheon and Gyeonggi Province, most of which he built himself. This is more than twice the scale of the so-called "Villa King," who owned 1,139 villas and failed to return jeonse deposits before passing away.

After a series of complaints about jeonse fraud in the Michuhol-gu area began in July, the police formed a dedicated team to investigate and confirmed the existence of the actual owner, A.

Meanwhile, A’s company, "Haengbok Gonggan-eul Mandeuneun Saramdeul" (hereafter Haengmansa), issued a statement through legal counsel regarding A’s arrest.

The company stated, "According to the 'Haengmansa Normalization Support TF,' total real estate assets are estimated at about 700 billion KRW, with debts including financial institution loans and lease deposits estimated at 530 billion KRW. The Support TF plans to contribute all of Haengmansa’s assets and A’s personal funds to asset securitization to provide bond amounts to tenants and major creditors."

They added, "Once a certain amount is accumulated over a period, we are preparing a plan to settle debts by redeeming and canceling securities proportionate to each bond amount. We will sequentially sell high-quality assets, deposit the proceeds into an escrow account, and transparently disclose the accumulated amounts."

This content was produced with the assistance of AI translation services.