LOS ANGELES – Police arrested 12 people today and are seeking three others who are charged in a large-scale, bank account “bust out” scheme that cost financial institutions across Southern California at least $15 million, authorities said today.
Major financial institutes such as Bank of America, JPMorgan Chase, U.S. Bank and Wells Fargo Bank were victimized by this check kiting scheme, officials claim.
The indictment describes the “bust out” scheme as crimes where the defendants deposited bogus checks and immediately withdrew funds from the account. Once the financial institution realized that the check is fraudulent and dishonored the deposit, the account was “busted,” according to authorities.
Some defendants allegedly found bank customers by placing advertisements in Korean-language newspapers
The indictment, which was returned by a federal grand jury on May 7 and unsealed this morning, describes a scheme that allegedly started in February 2010 and continued until last October 2013.
Those named in the indictment are:
- Jae Ho Chung, 44, of Los Angeles (Westwood);
- Michael Yeon Cho, 30, of Pacific Palisades;
- Roger Lee, 48, of Cerritos;
- Kun Young Lee, 51, of Los Angeles (Koreatown);
- Jeong Gu Kim, 53, of Los Angeles;
- Hak Soo Shim, 40, of Newport Beach;
- Renling “Mark Ling” Chao, 50, of Los Angeles (Brentwood);
- Il Hwan Jae, 60, of Los Angeles (Koreatown);
- Erick Palafox, 28, of ; of Lynwood
- Jae Kwon An, 42, of Riverside;
- Joonie Yeon Cho, 42, of Los Angeles (Koreatown);
- Eun Ah Kim, aka Eun Ae Kim, 39, of Los Angeles;
- Hye Ran Lee, 30, of Irvine;
- Hee Jung Lee, 41, of Riverside; and
- Woo Chang Lim, 36, of Ventura.
Jae Ho Chung, Roger Lee, and Hye Ran Lee are considered fugitives. Those taken into custody are expected to be arraigned on the indictment today.
According to the indictment, Chung and Cho were “processors” who fabricated or hired others to make fictitious checks for the purpose of conducting bust outs. The bogus checks ranged in amounts from $2,300 to more than $28,000.
Defendants R. Lee, K.Y. Lee, J.G. Kim, and Shim were “brokers,” according to the indictment that accuses them of soliciting people with legitimate bank accounts who would lend their accounts to be busted-out in exchange for a fee.
Defendants Chao, Jae, Palafox, An, J.Y. Cho, E.A. Kim, H.R. Lee, H.J, Lee, and Lim were “runners” or “washers” who allegedly deposited fictitious checks into, and then withdraw funds from, the account to be busted-out.
Runners and washers used funds from the bust outs to purchase goods, services and gift cards, according to the indictment.
All 15 defendants are charged with conspiracy to commit bank fraud and bank fraud.
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.
If convicted of the two counts in the indictment, each defendant would face a statutory maximum penalty of 60 years in federal prison.
The investigation was conducted jointly by the FBI; IRS – Criminal Investigation, and the Pomona Police Department.