[Economic Crime 24 Hours] "Delivery Industry Boom" Motorcycle Lease Fraud Involving Even Couples

"The principal is guaranteed, and we promise a monthly interest income of 5%."

Mr. Kim Jaegyeom (45, pseudonym) began his nightmare in April 2021, when COVID-19 was rampant. Recommended by an acquaintance to invest in a motorcycle lease business, Kim spent several days contemplating. Then, after hearing news that the delivery industry was booming due to COVID-19, he decided to invest. For the first few months, the promised profits came in regularly. However, soon the payments were repeatedly delayed and eventually stopped altogether. Thus, Kim's investment of tens of millions of won vanished like paper.

Delivery motorcycles waiting on a street in Seoul on the 5th. Photo by Jinhyung Kang aymsdream@

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The crime, committed by Mr. Jo (50) and Mrs. Hong (46), a couple running a motorcycle rental and repair business, along with Mr. Yoo (52), the owner of an auto repair shop, was carried out meticulously and delicately. Their plan began when Mr. Yoo proposed business expansion to the Jo couple during the growing delivery industry period.

They started recruiting investors by guaranteeing not only the principal but also a monthly 5% return. They explained to investors that the investment money would be used to purchase motorcycles, which would then be leased to delivery drivers, generating profits from lease fees and repair costs.

The amount collected from 20 investors was a staggering 23.4 billion KRW. However, instead of purchasing motorcycles, they were busy using the investment funds to pay dividends to other investors in a Ponzi scheme. They even forged motorcycle registration certificates to deceive investors into believing motorcycles had been purchased. They also forged documents to make it appear as if new motorcycles were bought when they had actually purchased used ones. They issued as many as 90 forged motorcycle registration certificates in this manner.

Investors, including Mr. Kim, did not suspect much because the delivery service companies were booming at the time, and similar investment businesses were actually operating. Moreover, the return rate was a high 5% monthly, or about 60% annually, much higher than other businesses, making it easy to be deceived.

Lieutenant Kim Ki-hyun of the Cheonan Dongnam Police Station in Chungnam, who directly investigated the case, explained, "Because they greatly inflated the returns, they were able to collect large sums from investors," adding, "We proceeded with the investigation based on the fact that the business was not viable and the return rate itself was an absurd figure."

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Investors suffered losses ranging from 26.4 million KRW to as much as 9.6 billion KRW. After receiving complaints from the victims, the police concluded that the perpetrators knew from the start they could not pay the promised principal and returns but still deceived the investors. They arrested Mrs. Hong and Mrs. Yoo, the wife of Mr. Jo, while Mr. Jo was referred to the prosecution without detention. Notably, during this process, Mrs. Hong even filed complaints against the Jo couple alongside the victims, pretending to be a victim herself.

The prosecution charged them with the same allegations, and the court's judgment was not much different. On January 10 of this year, the Criminal Division 1 of the Cheonan Branch of the Daejeon District Court (Presiding Judge Jeon Gyeong-ho) sentenced Mrs. Hong and Mrs. Yoo to six years in prison and Mr. Jo to three years in prison.

The court, like the investigative agencies, recognized the fraud, concluding that the defendants committed the crime knowing from the beginning that they could not return the investment funds. The decisive factor was that the average return rate for motorcycle lease businesses at the time was about 1.5%. The court stated, "It is clear that the structure inevitably operated as a Ponzi scheme," and judged, "The defendants excessively estimated the return rate at 5% per month."

Especially for Mrs. Hong, who played a leading role in the crime and received about 500 million KRW in investor recruitment commissions, the court strongly criticized her, saying, "She tried to evade responsibility by accusing other defendants and pretending to be a victim, shifting blame to accomplices, which makes her guilt heavier." Mrs. Hong denied the fraud charges during the trial, claiming, "I did not know that the Jo couple was running a Ponzi scheme or forging official documents."

Although the fraudsters are now behind bars, it seems unlikely that the victims will recover their investments. During the investigation, the police applied for seizure and confiscation of about 1.1 billion KRW, but the court only approved the confiscation, resulting in a recovery amount of just about 260 million KRW. Although COVID-19 has ended, the victims remain trapped in their own pandemic.

1. Abandon unrealistic greed.

2. Do not trust IOUs, memorandums, or notarized documents.

3. Do not trust people blindly in transactions.

4. Do not engage in illegal transactions.

5. Do not use intermediaries.

6. Always verify thoroughly 'in person.'

7. Take immediate action when suspicious.

8. Confirm real names before transactions.

9. Maintain awareness of fraud regularly.

10. Consult trustworthy institutions.

(Provided by Seoul Metropolitan Police Agency)

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