"Was it a crime to dream of owning a home?" The chilling story behind a Gwangjin District local housing project that lost 15 billion won [Case File]

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[Financial News] "For this apartment project, we have secured ownership of more than 15% of the land and land use rights for over 50%. Compared to other local housing associations, the procedures are progressing smoothly."
On September 17, 2020, at a promotional center for a local housing association in Gwangjin District, Seoul, an investor received this explanation while being briefed on a tentative project called the "River City Jayang" local housing association in the Jayang-dong area. The project promotion committee advertised that a substantial portion of the project site had already been secured, making it appear that the development would proceed stably. However, the court reached a different conclusion. The actual percentage of land use rights secured fell far short of the advertised figures, and the court found that only the association members who trusted these claims and paid in funds suffered massive losses.
According to the legal community on the 30th, Single-Judge Criminal Division 5 of the Seoul Eastern District Court (Judge Yang Jin-ho of the Seoul Eastern District Court) sentenced a real estate broker, A, in his 60s, to nine years in prison, and an office worker, B, in his 70s, to six years in prison on charges including fraud and violations of the Housing Act. The first-instance court found that the two had falsely advertised that they had secured far more land use rights than they actually had while recruiting members for the River City Jayang local housing association, which was promoting the construction of a new apartment complex in Jayang-dong. Based on these claims, they deceived association members and collected large sums in member contributions and project operating expenses.
The judgment states that from March 2019 to February 2020, A served as head of the project promotion committee for the local housing association and as chief executive of the project management company. B served as deputy head of the promotion committee and then took over as head of the committee from late February 2020 after A resigned. The investigation revealed that the two conspired to exaggerate the extent of land use rights secured in order to recruit association members more easily.
In August 2020, they placed a recruitment notice for association members in a daily newspaper, stating that land use rights had been secured for 52.75% of the project site. However, the actual rate at that time was only 16.45%, according to the investigation. Later, in March 2021, they issued another notice claiming a secured rate of 64.66%, but the real figure was just 24.46%. The court ruled that by omitting any mention of the land ownership rate and vaguely disclosing only the land use rights rate, they had twice violated the Housing Act.
The judgment also details the specific offenses against individual investors. In September 2020, at the association’s promotional center, the two had a staff member from a marketing company falsely inform an investor about the percentages of land ownership and land use rights. Misled by this information, the investor transferred a total of 60 million won in three payments over the course of a month, labeled as association member contributions and similar fees.
The court viewed the scale of the damage as extending beyond individual victims and having significant social repercussions. A and B received a total of 14,413,500,000 won from 237 victims, including the above investor, by June 2021. When combined with related consolidated cases, the total damage was found to exceed 15 billion won. The court noted that association members not only suffered substantial financial losses but also had to bear both tangible and intangible harm caused by prolonged project delays.
During the trial, the defendants denied the charges, arguing that they merely believed that a "unit district planning zone designation consent form" counted as documentation proving land use rights, and that they had no intent to deceive. B’s side further claimed that he had only nominally taken on the role of committee head at A’s request, and that he had not actually carried out duties or conspired in the offenses.
The court, however, held that the rate of land use rights secured is a key factor that determines both the success or failure of a local housing association project and whether people decide to join. It pointed out that, contrary to the "over 50%" figure the defendants had described, the actual rate was only about 20%. The court stated, "Consent for the establishment of a unit district plan alone cannot be regarded as securing land use rights under the Housing Act." It also noted that the defendants had extensive prior experience with similar projects and that internal reports clearly distinguished between the two types of documents, concluding that they fully understood the implications of manipulating the figures.
The court explained its sentencing decision, stating, "In light of how the crime was committed and the scale of the damage, the nature of the offense is serious. Little restitution has been made, and efforts to remedy the harm have been insufficient." It did, however, take into account that neither defendant had prior convictions for similar offenses.
In addition, B was also found guilty of a separate assault charge in this case. In June last year, near a building in Gwangjin District, he was accused of using physical force to shove a member of another local housing association who was trying to stop him from putting up posters. Based on the victim’s testimony and other evidence, the court also ruled this charge to be proven.
yesji@fnnews.com Reporter Kim Ye-ji Reporter