15 Charged In ‘Bustout’ Scheme That Cost Victim Banks $15+ Million
LOS ANGELES – Authorities this morning arrested 12 people and are seeking the whereabouts of three others who are charged in a large-scale, bank account “bustout” scheme that victimized major financial institutions across Southern California, costing banks at least $15 million.
This morning’s arrests are the result of “Operation Check Kkang,” a multi-agency investigation into a bustout scheme that victimized financial institutions such as Bank of America, JPMorgan Chase, U.S. Bank and Wells Fargo Bank. Check Kkang refers to a Korean term that describes check kiting.
The investigation was jointly conducted by special agents with the Federal Bureau of Investigation and IRS - Criminal Investigation, and officers with the Pomona Police Department. Other law enforcement agencies provided substantial assistance.
Those arrested this morning are among 15 defendants named in a 26-count indictment that describes a bustout scheme in which the members of the conspiracy 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.”
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.
Twelve of the defendants were arrested today. Jae Ho Chung, Roger Lee, and Hye Ran Lee are considered fugitives. Those taken into custody are expected to be arraigned on the indictment this afternoon. The arraignments will take place in federal courthouses in Los Angeles, Riverside and Santa Ana, with locations for specific hearings to be determined by where an individual defendant was arrested.
According to the indictment, Chung and Cho were “processors” who fabricated or hired others to make fictitious checks for the purpose of conducting bustouts. 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. The brokers allegedly found bank customers by placing advertisements in Korean-language newspapers,
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 bustouts 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 Check Kkang investigation was conducted jointly by the FBI; IRS - Criminal Investigation, and the Pomona Police Department.
The following agencies provided assistance: U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, the United States Secret Service, the Los Angeles Police Department, the United States Postal Inspection Service, the Social Security Administration, the Los Angeles County Sheriff’s Department, the Ventura County Sheriff’s Department, the Riverside County Sheriff’s Department, the Glendale Police Department, the Burbank Police Department, the Beverly Hills Police Department, the Santa Ana Police Department, and the Los Angeles County Department of Child and Family Services.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until proven guilty in court.
Release No. 14-062