A group of individuals who purchased around 50 villas in the metropolitan area without capital using a “gap investment” method, then rented them out and embezzled a total of 11.5 billion won in deposits, have been apprehended by the police. The Anti-Corruption and Economic Crime Investigation Unit of the Ulsan Metropolitan Police Agency announced on the 10th that they had arrested Mr. A, the head of a real estate consulting company and the main perpetrator, along with 42 others who assisted in the crime, including a licensed realtor and organizers for rent-a-name schemes, without detention on charges of fraud and other offenses.
From January 2021 to June the following year, Mr. A and others allegedly purchased 53 villas in Seoul, Incheon, and other areas around Gwangju and Hanam in Gyeonggi Province, then rented them to 53 tenants, embezzling a total of 11.5 billion won in deposits. They targeted so-called “shell houses,” where the purchase price was lower than the rental deposit, committing the crime using a “no-capital gap speculation” method.
For instance, they colluded with homeowners who intended to sell villas for 250 million won, set the sales price up 20% to 300 million won, and sold them to pre-arranged rent-a-name buyers while renting them out at the same price as the sales price. In this way, the group received a 300 million won deposit from the rental tenant, paid the original homeowner the actual villa price of 250 million won, and shared the remaining 50 million won among themselves.
It was found that credit delinquents or those needing quick cash, who acted as rent-a-name buyers, received around 1 to 2 million won in return for lending their names as purchasers. Additionally, it was revealed that the licensed realtor signed the agreements as if they were normal transactions, knowing it was rental fraud, and received around 1 million won monthly.
The group also guided tenants, most of whom were beginners in society or in their 30s, to purchase Housing and Urban Guarantee Corporation (HUG) rental guarantee insurance to feel secure during the contract process. The criminal activities were exposed when tenants were unable to receive back deposits amounting to 200 to 300 million won upon lease expiration and reported it to the police. A police source stated that the group exploited weaknesses in the HUG rental guarantee insurance subscription review, where they primarily acknowledged the appraised value, and used brokers to inflate appraisal values, a method known as “up appraisal.” Investigations are ongoing to further probe these activities.