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Korean check kiting scheme costs banks $15 million

May 15, 2014

FBI arrests 12 and three more are considered fugitives

Defendants face a maximum penalty of 60 years in federal prison if convicted.

Twelve people have been arrested and three are missing after a large-scale “bustout” scheme of check kiting that has cost major financial institutions at least $15 million.

The scheme, operated by a predominantly Korean group and called “Operation Check Kkang,” targeted institutions such as Bank of America, JPMorgan Chase, U.S. Bank and Wells Fargo Bank.

Missing on Thursday are Jae Ho Chung, 44, Roger Lee, 48, and Hye Ran Lee, 30, who are considered fugitives and whose photos have been provided to the media. The remaining 12 defendants have been indicted on 26 counts.

Check kiting is a term used to describe a form of fraud in which funds are immediately withdrawn from an account after a bogus check has been deposited.

Named in the indictment aside from the three fugitives are: Michael Yeon Cho, 30; Kun Youong Lee, 51; Jeong Gu Kim, 53; Hak Soo Shim, 40; Renling “Mark Ling” Chao, 50; Il Hwan Jae, 60; Erick Palafox, 28; Jae Kwon An, 42; Joonie Yeon Cho, 42; Eun Ah Kim, 39; Hee Jung Lee, 41; and Woo Chang Lim, 36.

The indictment accuses the group of being comprised of “processors,” those in charge of creating the fictitious checks, “brokers,” who found legitimate bank customers through advertisements in Korean-language newspapers to charge for the service of busting out and “runners,” who deposited and withdrew from accounts using the bogus checks.

According to the indictment, the fake checks used ranged from $2,300 to more than $28,000.

“All 15 defendants are charged with conspiracy to commit bank fraud and bank fraud,” the Department of Justice news release says. “The indictment also contains an asset forfeiture allegation in which the government will seek to forfeit any property derived from the proceeds of the scheme in the event of any defendant’s conviction.”

Defendants face a maximum penalty of 60 years in federal prison if convicted.

The operation allegedly started in Feb. 2010 and continued until Oct. 2013. The investigation was conducted by Federal Bureau of Investigation special agents, IRS Criminal Investigation and Pomona Police Department officers.