CONTENTS
- 1. Unauthorized Fund-Raising (Illegal Deposit-Taking) | Definition
- - Typical Forms of Unauthorized Fund-Raising
- - Main Characteristics
- 2. Unauthorized Fund-Raising (Illegal Deposit-Taking) | Level of Punishment
- - Possibility of the Crime of Fraud Being Established
- - Sentencing Guidelines
- 3. Unauthorized Fund-Raising (Illegal Deposit-Taking) | If You Are a Suspect?
- - Establishing an Early Response Strategy in the Investigation
- - Rebutting Intent and Deception
- - Legal Review
- - Trial Response and Sentencing Strategy
- 4. Unauthorized Fund-Raising (Illegal Deposit-Taking) | If You Are a Victim?
- - Response and Procedure
- 5. Unauthorized Fund-Raising | Difficult to Handle Alone?
1. Unauthorized Fund-Raising (Illegal Deposit-Taking) | Definition
Unauthorized fund-raising literally means "similar deposit-taking (fund-raising)."
This refers to the act of soliciting money from the general public under the pretext of investment or savings, despite not being an officially authorized financial institution.
Although the money is solicited by making the operation appear to be a legitimate financial institution, it is in fact an illegal act carried out without legal authorization.
Typical Forms of Unauthorized Fund-Raising
▷ Where unreasonably high interest or high dividends are promised
▷ Where money is solicited from homemakers and others through a multi-level marketing method
▷ Where investment is solicited with a guarantee of a fixed return of 100% or more of the principal
Main Characteristics
① Where a person who was previously sanctioned for a similar investment method resumes a business with the same structure by changing only the product, and operates it by putting forward a nominal representative
② A form that approaches through a complex investment method or product sales model that is difficult for ordinary consumers to understand
③ A method of inducing trust by using various documents or materials unrelated to the actual business content
④ Where the mere fact of notarizing a contract is excessively emphasized to highlight legal stability
⑤ A method of drawing out trust by using the image of a celebrity or by displaying connections with political or government figures
⑥ A form that emphasizes an agreement (MOU) or partnership with an overseas institution that is difficult to verify
⑦ Where the principal and returns are guaranteed verbally at a business presentation or the like, but the relevant content is not specified in the contract
⑧ A method of inducing additional investment after gaining the investors' trust by paying out a portion of the returns at the early stage
2. Unauthorized Fund-Raising (Illegal Deposit-Taking) | Level of Punishment
Unauthorized fund-raising is punishable under the Act on the Regulation of Conducting Fund-Raising Business Without Permission, and the levels of punishment are as follows.
▶ Levels of Punishment
A person who engaged in unauthorized fund-raising | Imprisonment for not more than 5 years or a fine not exceeding 50 million won |
Where labeling or advertising was carried out in order to engage in unauthorized fund-raising | Imprisonment for not more than 2 years or a fine not exceeding 20 million won |
Where a representative of a corporation or similar person engaged in unauthorized fund-raising and labeling or advertising | A fine under the joint penalty provision |
Where unauthorized fund-raising was carried out using a trade name similar to that of a financial business | An administrative fine not exceeding 50 million won |
Possibility of the Crime of Fraud Being Established
Looking at the precedents applying unauthorized fund-raising, most cases were also prosecuted together as the crime of fraud.
The facts must be examined precisely, but in most cases the conclusion is that the crime of fraud is constituted, because the representation that the principal and high returns are guaranteed includes the fact of deceiving the investors.
Therefore, when one is contacted by the police for an investigation into unauthorized fund-raising, a response plan should be prepared not only for the unauthorized fund-raising but also for the crime of fraud as a whole.
Sentencing Guidelines
▷ Simple participation
▷ Mental and physical weakness
▷ Voluntary surrender, internal whistleblowing, or a complete and voluntary disclosure of the full extent of the offense (an organized offense)
▷ The victim's wish not to punish or recovery of the damage (including a deposit in court)
▷ Passive participation
▷ Where the actual amount of profit is minor
▷ Where the amount of funds raised or the scale of the business resulting from the offense is very small
▷ Genuine repentance
▷ No record of criminal punishment
▷ Cooperation with the investigation
See More
3. Unauthorized Fund-Raising (Illegal Deposit-Taking) | If You Are a Suspect?
If you are alleged to have engaged in unauthorized fund-raising, it is very important to clearly organize your position and respond systematically during the investigation and trial.
Establishing an Early Response Strategy in the Investigation
Before being questioned by the police or the prosecution, it is important to organize the overall sequence and structure of the case on your own.
Related documents, such as contracts, informational materials, and deposit records, should be kept separately, and preparation is needed because a search and seizure may be conducted.
Rebutting Intent and Deception
In cases of unauthorized fund-raising or fraud, a key issue is whether there was an intent to deceive from the outset.
It is therefore advisable to organize, on your own, whether the business plan was feasible at the time the money was received and what the basis was for concluding that a profit could be generated.
If records of actual expenditures, business operation materials, or a profit-structure chart exist, securing them can help explain that there was no intent.
It is important to state consistently that the purpose was business and that there was no intent to deceive the other party.
Legal Review
You must assess whether your conduct truly constitutes unauthorized fund-raising.
If the scope of investment was limited, or if the terms were clear and did not guarantee high returns, it is advisable to organize this point.
Organizing specific notes on the persons solicited, the method of contracting, and the actual manner of operation can be helpful in a later investigation or trial.
Trial Response and Sentencing Strategy
If you have already been indicted or a trial is in progress, it is important to emphasize that you did not lead the solicitation of investors, or that you were merely in a position that carried out instructions.
Organizing and submitting circumstances showing that you tried to return at least part of the funds to the victims, or that the situation at the time was unavoidable, can help with sentencing.
Because attitude and sincerity are also reflected in a criminal trial, it is important to approach it in a prepared manner.
4. Unauthorized Fund-Raising (Illegal Deposit-Taking) | If You Are a Victim?
If you have confirmed that you have suffered harm from unauthorized fund-raising, it is important to proceed with the response procedure promptly.
Response and Procedure
Response Method | Details | How to Proceed |
Securing evidence | Collect materials related to the unauthorized fund-raising, such as investment contracts, deposit records, text messages, and call recordings | Keep photographs and recordings, print out account transaction records, and the like |
Criminal complaint | Unauthorized fund-raising may be punishable as the crime of fraud, so a criminal complaint can be filed | Visit a nearby police station or use the National Police Agency cybercrime report |
Report to the Financial Supervisory Service | Reporting to the financial authorities can lead to an investigation and administrative measures | Call the Financial Supervisory Service at 1332 or use the ‘FINE’ website |
Civil claim for damages | A civil lawsuit can be filed to recover the invested funds | Visit the civil affairs office of a district court or use the electronic litigation system |
5. Unauthorized Fund-Raising | Difficult to Handle Alone?
In unauthorized fund-raising cases, complex facts such as the flow of funds, the method of solicitation, and the business structure are examined closely during the investigation.
In particular, because numerous legal issues, including whether intent can be proven, the calculation of the scale of harm, and the scope of investors and contractual relationships, must be analyzed in a specialized manner, an inadequate response may result in legal disadvantage.
Daeryun LLC has many criminal defense attorneys experienced in unauthorized fund-raising cases, and it responds promptly and systematically.
Through an evidence investigation center (a cooperating provider), it thoroughly collects and analyzes key evidence, such as financial transaction records and contracts, to prepare a defense strategy suited to the circumstances.
If you are facing an investigation or need a response regarding unauthorized fund-raising, 🔗criminal law legal consultation booking allows you to review the issues in the case and the response strategy.
Daeryun (ranked 9th among law firms in the Republic of Korea, based on 2025 National Tax Service value-added tax filings) provides tailored legal services.
