Daejang-dong Case: Seized Accounts Found “Empty” Amidst Allegations of Hidden Criminal Proceeds
Seongnam City, located in Gyeonggi Province, has revealed a significant setback in its efforts to recover alleged criminal proceeds from private developers implicated in the controversial Daejang-dong development project. The city announced on the 12th that accounts provisionally seized for the purpose of recouping an estimated 444.9 billion Korean won in illicit gains were found to be largely “empty.” Investigations into the seized accounts revealed only approximately 470 million Korean won remaining, leading Seongnam City to conclude that “the criminal proceeds had already been hidden and transferred.”
This revelation follows a series of legal maneuvers by Seongnam City. After prosecutors opted not to appeal a first-instance ruling in the Daejang-dong case, the city initiated legal proceedings in December of the previous year. These proceedings involved applying for 14 provisional seizure and injunction measures, totaling a substantial 5.579 trillion Korean won, against key private developers associated with the project: Kim Man-bae, Nam Wook, Jung Young-hak, and Yoo Dong-gyu. The primary objective was the recovery of criminal proceeds. Despite receiving full approval from the court for these measures, the subsequent examination of the seized accounts presented a stark reality. The city reported that upon accessing the accounts, they discovered balances ranging from mere tens of thousands to tens of millions of Korean won, effectively rendering them “empty accounts.”
Details of Seized Account Balances:
According to information provided by Seongnam City, based on statements obtained from third-party debtors, specifically financial institutions, the balances in the provisionally seized accounts were alarmingly low:
- Kim Man-bae’s Hwacheon Daeyu Account: This account, with a claimed amount of 270 billion Korean won, held a mere 70,000 Korean won.
- The Spring Account: Associated with a claim amount of 100 billion Korean won, this account contained only 50,000 Korean won.
- Nam Wook’s NSJ Holdings Account: This account, linked to a claim of 30 billion Korean won, had a balance of 48 million Korean won.
- JS Ire Account: With a claim amount of 4 billion Korean won, this account showed a remaining balance of approximately 400 million Korean won.
Seongnam City explicitly stated that these findings strongly suggest that “before or during the prosecution’s execution of the preservation order, the Daejang-dong group had already embezzled thousands of billions of Korean won in criminal proceeds to other locations.”
Allegations of Prosecutorial Non-Cooperation:
The city has also voiced concerns regarding the conduct of prosecutors in this matter. Seongnam City claims that prosecutors were aware of the alleged fund diversion for the past four years. However, they allege that this crucial information regarding the flow of funds from the Daejang-dong group’s assets was not shared with the city, and only insufficient data was provided.
A review of investigation records by the city indicates that by late July 2022, prosecutors had already identified that a staggering 96.1% (equivalent to 427.7 billion Korean won) of the estimated 444.9 billion Korean won in criminal proceeds had been spent, hidden, or transferred. This left a mere 17.2 billion Korean won, or 3.9%, in the accounts at that time.
The situation has further deteriorated since then. The most recent confirmations of account balances through the provisional seizure process revealed a further decrease, bringing the total remaining funds to around 470 million Korean won.
Seongnam City emphasized the detrimental impact of this alleged lack of transparency. A statement from the city asserted, “If prosecutors had sincerely shared the actual execution details of the preservation order from the beginning, even with limited time and administrative resources, we could have prioritized assets with significant benefits and conducted more precise and effective provisional seizures.” The city highlighted that preservation orders alone are insufficient to guarantee the continued effect of asset freezing, as changes like auctions, cancellations, and fluctuations in account balances and transaction routes can occur. They stressed the importance of providing a “preservation order execution list” to ensure the effectiveness of such measures.
Call for Proactive Cooperation:
Seongnam Mayor Shin Sang-jin issued a pointed statement, directly addressing the Ministry of Justice and prosecutors. He warned, “If prosecutors continue to avoid providing substantial data, they will inevitably face suspicions of giving the Daejang-dong group more time.” Mayor Shin urged for “proactive cooperation from this moment onward” to facilitate the recovery of the alleged illicit gains and to ensure the integrity of the legal process. The situation underscores the ongoing challenges in asset recovery in complex financial and legal cases, particularly when allegations of deliberate obfuscation are involved.
