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Check Kkang: 12 Arrested in Check-Kiting Scheme

By   /   May 15, 2014  /   Comments Off

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PE.Com-Authorities have arrested 12 people, including two from Riverside, and are seeking three more in what they are calling a “sophisticated scheme” that cost banks in Riverside, Los Angeles, Orange and Ventura counties at least $15 million.

At a news conference Wednesday at the Federal Bureau of Investigations headquarters, Timothy Delaney, the head of the department’s criminal division, announced that Jae Ho Chung, 44, of Los Angeles and members of his organization – which was based in and around Koreatown – were responsible for defrauding banks by a form of fraud known as check kiting.

In kiting, counterfeit checks are deposited into bank accounts and funds are immediately

withdrawn before financial institutions realize the checks are fraudulent.

The morning’s arrests were a result of a multiagency investigation called “Operation Check Kkang,” referring to a Korean term that describes check kiting.

Delaney detailed how the elaborate plan was operated from February 2010 to October 2013.

“The ring leaders put ads in the Korean newspapers pretty much saying: ‘Do you want to make quick cash?’ and then gave a number to call,” he said.

These advertisements were reportedly in Korean-language newspapers all over Southern California.

Advertisements would target people with legitimate

bank accounts in good standing that would give immediate credit and funds instead of holding checks for multiple days.

Ring leaders would give people fake checks to deposit and they would withdraw money. The account holder would keep a portion of the money, but the leaders would keep the bulk of it. Agents said they have tracked at least 500 incidents of the fraudulent activity but they believe there may be more. The fake checks deposited ranged in amounts from $2,300 to more than $28,000.

Erick Martinez, FBI agent in charge of the International Revenue Service criminal investigations, said the scam affected major banks, including Bank of American, Wells Fargo, and J.P. Morgan Chase.

“They were all cheated, all victimized by this scam,” Martinez said.

He said the agencies are working to track the money and reclaim as much of it as possible. Any property derived from the proceeds of the scheme would also be seized.

Though they are unsure of how many, authorities said there could be hundreds of people involved in the crime.

Account holders who knowingly participated in the fraud, also may face prosecution in the future. Delaney said it is possible that some of those who responded to newspaper ads may have not been aware the actions were illegal.

“They targeted working class people and in general they might not be as financially savvy,” Delaney said.

All 15 individuals were indicted with the criminal rings for their roles.

According to the indictment, Chung and Michael Yeon Cho, 30, of Pacific Palisades, were leaders who lied to others or hired them to make fictitious checks.

According to the indictment, each of the 15 people has been charged with conspiracy to commit bank fraud and bank fraud. If convicted of the counts, each person would face a maximum penalty of 60 years in federal prison. Story source>LINK

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