‘1 Trillion Won Multi-Level Marketing Fraud’ Huestem Korea CEO Sentenced to 7 Years in First Trial...Jailed in Court
Lee Sang-eun, CEO of Huestem Korea, who was indicted on suspicion of a trillion-won illegal multi-level marketing scam, was sentenced to prison and taken into custody after the first trial.
The Seoul Central District Court Criminal Division 31 (Presiding Judge Park Jun-seok) on the 29th sentenced Lee, who was charged with violating the Door-to-Door Sales Act, to the maximum legal penalty of 7 years in prison and a fine of 1 billion won. Eight executives of Huestem Korea who were tried together were sentenced to prison terms ranging from 1 year and 6 months to 4 years. Some sentences were suspended. The Huestem Korea corporation was fined 100 million won.
The court did not accept the defendant’s claim that Huestem Korea was not a multi-level marketing-like organization. The court stated, “It is mathematically clear that promising compensation at least 2.6 times the advance payment or virtually an infinite amount is inherently absurd,” and added, “It cannot be sustained by its own profits and will not continue unless new members are recruited.”
The court also said, “This is a typical ‘advance payment Ponzi scheme’ financial transaction,” and explained the sentencing rationale: “The organized financial transactions using a quasi-multi-level marketing organization took place over a long period of more than 4 years, with confirmed transaction amounts reaching approximately 1.2 trillion won. Even the amount currently indicted is unprecedented in multi-level marketing cases, requiring a correspondingly severe punishment.”
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Lee is accused of collecting more than 1.19 trillion won from about 100,000 people under the pretext of membership fees using a multi-level marketing-like organization. After being detained in December last year, Lee was released on bail in May but was re-arrested as the bail was revoked following this sentencing.
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