2016No2317 Violation of the Act on the Regulation of Conducting Fund-Raising Business without Permission, Financial Investment Services and Capital Markets

Violation of the Convergence Investment Business Act

1. A;

2. B

3. C.

Both parties

Mobile (prosecution) and Kim Jong-chul (Trial)

Law Firm D (Defendant A and B)

Attorney E, AH

Law Firm AI (for Defendant A)

Attorney J, AK, AL, AM, andN

Law Firm AO (For Defendant C)

Attorney AP, AP, Q, and AR

Seoul Central District Court Decision 2016Gohap152 Decided July 22, 2016

June 21, 2017

The judgment of the court below is reversed.

Defendant A shall be punished by imprisonment with prison labor for four years, by two years, and by imprisonment with prison labor for each of two years.

1. Summary of grounds for appeal;

(a) An inspection;

The sentence of the lower court against the Defendants (the 4-year imprisonment, the 2-year imprisonment, the 2-year imprisonment, and the 3-year imprisonment) is too unhued and unreasonable.

B. Defendant A1 and B

(1) misunderstanding of facts

H’s investors have renewed the system use contract every three months, and some investors received a return of the previous investment money and deposited it again. The amount of overlapping investment amount is included in KRW 82,299,80,000, which the lower court recognized as a deceptive amount, and when excluding all the amount, the amount collected by H is merely KRW 58,90,000,000 in total from 2,113 investors. Nevertheless, the lower court erred by misapprehending the facts, thereby recognizing the amount of defraudation by the Defendants as above, and it is unlawful as it constitutes a case where the facts charged are not specified.

2) Unreasonable sentencing

The sentence of the lower court against the Defendants is too unreasonable. Defendant C is a defendant

1) Legal principles

The Defendants’ act of soliciting investment funds through H (the instant crime) and the act of soliciting investment funds through P throughout the whole business period constitutes a business offense with the same subject of crime, method of crime, and mode of conduct during the entire business period, and both are in a single comprehensive crime relationship.

However, inasmuch as a judgment of conviction has become final and conclusive on the act of raising investment funds through P which is related to a single comprehensive crime, a judgment of acquittal should be rendered in accordance with Article 326 subparagraph 1 of the Criminal Procedure Act for the instant crime, which is the previous crime, based on the time of

2) misunderstanding of facts

The Defendant is merely involved in the management of eight centers among H 20 centers, and the sum of the victims’ investments is limited to approximately KRW 56 billion, and the Defendant’s part among them is the smaller amount. Nevertheless, the lower court erred by misapprehending the facts, thereby convicting the Defendant of the total amount of KRW 82,29,800,000, which is the investment amount of H, as a co-principal.

3) Unreasonable sentencing

The sentence of the court below against the defendant is too unreasonable.

2. Determination

A. Ex officio determination

According to the records, on September 22, 2016, the Seoul High Court sentenced Defendant A to the crime of violation of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (Fraud), the crime of violation of the Act on the Regulation on the Aggravated Punishment, etc. of Specific Economic Crimes, and the crime of violation of the Financial Investment Services and Capital Markets Act, and seven years of imprisonment with prison labor for Defendant A, Defendant B, and C. The above judgment is recognized as finalized on January 25, 2017. However, the crime of this case is in the relation of concurrent crimes with the above final judgment under the latter part of Article 37 of the Criminal Act, and is in the relation of concurrent crimes under the latter part of

Therefore, the judgment of the court below is no longer able to maintain, since concurrent crimes should be dealt with for the crime of this case.

However, the defendants' assertion of misunderstanding of facts and misapprehension of legal principles is still subject to the judgment of this court, and this is examined.

B. Judgment on the misconception of facts by Defendant A and B

1) The act of fund-raising under Article 3 and Article 2 subparag. 1 of the Act on the Regulation of Conducting Fund-Raising Business without Permission is an immediate crime established upon the agreement to pay a total amount of money invested or an amount exceeding it in the future and the act of fund-raising is an immediate crime that is completed simultaneously (see, e.g., Supreme Court Decision 2009Do5075, Sept. 10, 2009). Meanwhile, in a case where a fund-raising business operator receives money through fund-raising business without permission and conducts fund-raising as a type of fund-raising, he/she shall exclude the amount of fund-raising from the sum of the amount of fund-raising. However, if the fund-raising is conducted with the victim’s actual receipt of all or part of the money received without permission, and then re-investment is conducted with the victim’s actual receipt of the money, such re-investment is a

2) According to the evidence duly adopted by the lower court and the first instance court, the Defendants concluded a “system use contract with H for the purpose of using H’s futures-related crowdfunding software, and made a solicitation of investment, and the contract period may be terminated or extended three months after the expiration of the contract period, but the automatic extension may not be made, except in extenuating circumstances, if the investors expressed their intent not to extend the contract after the expiration of the contract period, the principal and the profits were returned to the investors. Some investors concluded a system use contract with the Defendants using the returned principal and profits as the source of the returned principal and profits and remitted the amount of re-investment.

3) However, even if a part of the victims remitted the money returned from the Defendants to the account designated by the Defendants for re-investment with the financial resources, this constitutes a violation of new legal interests. Therefore, it is reasonable to calculate the total amount of money remitted to the account designated by the Defendants. Therefore, the lower court’s determination that recognized the amount of damage in this case as KRW 82,29,80,000 on the basis of each amount deposited into the three accounts used in the H’s deposit of investment from around 21, 2014 to March 10, 2015 is reasonable, and this part of the Defendants’ assertion is without merit.

C. Judgment on Defendant C’s misapprehension of the legal principle

1) The following facts are acknowledged according to the evidence duly adopted and examined by the court below and the court below.

① According to the Seoul High Court Decision 2016-961 Decided September 22, 2016, the lower court was sentenced to seven years of imprisonment on the grounds of criminal facts, etc. committed by the Defendant while operating P from March 11, 2015 to August 24, 2015, and the said judgment became final and conclusive on January 25, 2017.

H After its establishment on August 28, 2014, after liquidation was completed on September 9, 2015, 2015, 2015, H was closed. The location of its head office was Seoul Gangnam-gu G, 10, and 13. The registered representative director was N. On February 25, 2015, P acquired AS and changed its trade name to P. On February 25, 2015, the location of its head office was changed to Gangnam-gu Seoul, G, 13, and 14 again on March 11, 2015, and the registered representative director was AU.

③ In order to expand the scale of business, Defendant A acquired AS whose investment advisory business and discretionary investment business had been registered with the Financial Services Commission and established P P. In this regard, Defendant A made a statement to the effect that “The purpose of Defendant A was to move back to a company included in the system subject to supervision by the Governor of the Financial Supervisory Service, and planned to establish P from H Section.”

④ When an investor transfers investment funds, H provided operating funds of the same amount as that of the investment funds to manage the amount equivalent to twice the investment funds. However, H promised to guarantee the principal of the investment by promoting that the investor would give up its profits and compensate for losses if any loss occurs in the course of the investment. However, P did not provide the above company’s investment funds, but only operated the investment funds of the investor. In order to enhance investor’s apprehension, P drafted a back contract including the principal guarantee provision, and thereafter promised to guarantee the principal by concluding a separate monetary loan agreement with the investor.

⑤ After the closure of H and the establishment of P, H, upon receiving full payment of investment money and earnings from the Plaintiff, instructed investors to enter into a new investment contract with P to transfer investment money again. Although some of the investors of H at the time entered into a new investment contract with P, there was an investor who completed the investment after receiving investment money and earnings from P, and the first investor was also deemed to have commenced the investment after the establishment of P. From March 11, 2015 to August 24, 2015. In fact, the Defendants received KRW 138,031,000,000 from an investor 2,993 while operating the P from March 11, 2015 to August 24, 2015. This difference between the Defendants received a total of KRW 82,29,80,000 from investors 1,90.

2) In light of the following circumstances acknowledged as above, i.e., ① Defendant A established P with a plan to operate an investment advisory business and discretionary investment business from the time of H operation, which may be deemed to have been a new crime of creating a new institutional finance company in a situation where H is unable to attract large-scale investment as a so-called “non-institutional financial company,” and thus, it may be deemed that there was a resolution for the crime of expanding the scale of investment attraction. ② In fact H and P have been operated as a separate corporation with different registration directors, location of its head office, etc., as well as other separate corporations; and the fact that there were considerable differences between the fund management and principal guarantee method, the scope of victims, and the amount of damage amount, the Defendants attempted to engage in a separate fund-raising business by establishing a new organization to expand the scale of the fund-raising business, and thus, the crime of this case cannot be said to have a relation between the

3) Therefore, the allegation of misapprehension of legal principles as to acquittal judgment by the Defendant is without merit on different premise.

D. Judgment on Defendant C’s assertion of mistake of facts

As to the defendant's assertion to the above purport at the court below, the court below rejected the defendant's assertion in light of the detailed circumstances in the 5th through 7th 11th of the judgment. Examining various circumstances recognized by the court below compared with the evidence legitimately adopted and examined by the court below, the judgment of the court below is just. Therefore, the court below cannot be said to have erred in misunderstanding of facts as alleged by the defendant, and the defendant's assertion is without merit.

3. Conclusion

The judgment of the court below is reversed in its entirety pursuant to Article 364(2) of the Criminal Procedure Act, and it is again decided as follows, without examining the prosecutor's and the Defendants' assertion of unfair sentencing.

[Grounds for multi-use Judgment]

Criminal facts

In this part, the reasons for this court's statement are as follows, and it is identical to the corresponding column of the court below's judgment except for the dismissal of the "criminal history" portion as follows.

On October 7, 2015, the defendant A was sentenced to a suspended sentence of five years for a violation of the Act on the Regulation of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes at Suwon District Court, which was sentenced to a suspended sentence of five years on February 18, 2016. On September 22, 2016, the Seoul High Court sentenced 13 years to imprisonment for a violation of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (Fraud) at the Seoul High Court on January 25, 2017 and the above judgment became final and conclusive on January 25, 2017. On August 12, 2015, the defendant B was sentenced to a suspended sentence of one year for a violation of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (Fraud) at Suwon District Court on September 18, 2015, and the above judgment became final and conclusive on September 25, 2017 through the Seoul High Court’s imprisonment for a violation of the Aggravated Punishment Act (Fraud).

Summary of Evidence

In this part, the reasons for this Court are as follows: (a) except for the addition of 'A', AV, AW', and AX' to the corresponding column of the judgment of the court below; and (b) it is also cited in accordance with Article 369 of the Criminal Procedure Act.

Application of Statutes

1. Article relevant to the facts constituting an offense and the selection of punishment;

Articles 6(1) and 3 of the Act on the Regulation of Conducting Fund-Raising Business without Permission; Article 30 of the Criminal Act; Article 44 Subparag. 1 and Article 11 of the Financial Investment Services and Capital Markets Act; Article 30 of the Criminal Act (the point of running a financial investment business without permission; the choice of imprisonment)

1. Handling concurrent crimes;

Articles 37 (latter part) and 39 (1) of the Criminal Act

1. Aggravation for concurrent crimes;

Articles 37 (former part of Article 37, Article 38 (1) 2, and 50 (Aggravation of concurrent crimes with punishment prescribed for a violation of the Financial Investment Services and Capital Markets Act with heavier offense) of each Criminal Act

The reasoning for sentencing is that it is difficult to regard all the amount received in the decision of the court below as the amount of profit of the Defendants, and Defendant B and C do not have any personal benefits derived from the crime of this case, and the Defendants have been finally convicted of the violation of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (Fraud), etc. of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (Fraud), which is a concurrent crime under the latter part of Article 37 of each Criminal

On the other hand, the act of fund-raising, such as the instant crime, such as the act of fund-raising, has a great impact on society through distortion of market economy order, as well as on the amount of damage, in a short period. A majority of the victims caused by the instant crime, and the amount of damage also exceeds KRW 82.2 billion. Defendant A and B had a criminal record punished by the act of fund-raising without delay in the past, and Defendant C contributed to the expansion of damage by soliciting investment by using the victims’ belief on their expertise. These circumstances are disadvantageous to the Defendants.

In addition to these circumstances, the Defendants’ age, character and conduct, environment, means and consequence of the crime, motive of the crime and circumstances before and after the crime are determined as ordered by comprehensively taking account of all the sentencing conditions in the instant case.

The presiding judge, Kim Gung-gi

Judges Lee Jin-hee

Judges Choi Ki-won

1) Defendant A: (1) The instant crime and P through H, as alleged in the misapprehension of the legal principles by Defendant C, as seen below.

The judgment of acquittal should be rendered on the facts charged of this case on the premise that the crime is in a single comprehensive crime; and

(2) The automatic trading system operated by H is under the Financial Investment Services and Capital Markets Act (hereinafter referred to as the "Capital Markets Act").

(1) The defendant's business activities do not constitute financial investment instruments and also constitute financial investment business (collective investment business) under the Financial Investment Services and Capital Markets Act

Since it is not reasonable, this article argues to the effect that the defendant cannot be punished as a violation of the Financial Investment Services and Capital Markets Act.

The head of the Gu shall not file a petition of appeal or statement of grounds of appeal, but file a statement of grounds of appeal after the deadline for filing a petition of appeal.

28. Only the content asserted in each defense counsel’s opinion as of March 2, 2017 and deemed legitimate grounds for appeal.

subsection (b) of this section.

2) The lower court’s determination is as follows:

A person shall be appointed.