Jo Hui-pal fraud case

Overview

The Jo Hui-pal fraud case was a scheme in which Jo Hui-pal, the operator of a multi-level marketing business based in Daegu in the mid-to-late 2000s, and his associates promised high returns to attract investors' money, then kept the operation running by paying earlier investors with money from new ones, until it collapsed. According to the results of a re-investigation announced by the Daegu District Prosecutors' Office, between June 2006 and the end of October 2008 they raised a total of 5,071.5 billion won from about 70,000 people through 24 corporate entities based in Daegu, Incheon, Busan and elsewhere. Of this, about 4,870.1 billion won was paid back to earlier investors under the label of "profit payments," and prosecutors estimated the actual criminal proceeds at about 290 billion won. It is often described as the largest multi-level marketing and pyramid-type investment fraud in Korean history.

The principal offender, Jo, fled to China by boat from Taean, South Chungcheong Province, in December 2008, after the investigation closed in on him. In 2012, news spread that he had died in China, and in June 2016 prosecutors concluded that he had died in December 2011 and issued a decision of "no grounds for prosecution." The victims' groups objected that there was insufficient evidence of his death, and rumors that he was still alive persisted for a long time.

Methods and Scale of Damage

Jo's group attracted investors by promising high returns through businesses such as medical equipment leasing, and grew by paying returns to existing investors with new investment money. Such a structure was bound to collapse immediately once new investment dried up.

The scale of the damage varies greatly depending on how it is counted.

• Total amount raised: According to the prosecutors' re-investigation, 5,071.5 billion won from about 70,000 victims.
• Net loss: Reports indicate that the actual loss, excluding money returned to investors, was about 840 billion won (Bizhankook).
• Victims' group claims: The victims' group Basilyeon has long argued that the damage amounted to about 8 trillion won, of which at least 2 trillion won went to Jo's side.

Many victims lost their livelihood funds, and the Korean Wikipedia records that about 30 victims who received no relief took their own lives.

Timeline

Collapse and flight

At the end of October 2008, the businesses effectively ceased operations and the repayment of investments stopped. Jo was placed on a wanted list in November 2008. He is believed to have fled to China by boat that December from the Magampo area of Taean County, South Chungcheong Province. Kang Tae-yong, an associate who had handled funds, also fled to China in November 2008. Suspicions that the Coast Guard had turned a blind eye to the escape led to an internal inspection.