Art gallery head who scammed investors out of 100 billion won given 18-year sentence

A gallery head who scammed art investors of more than 100 billion won ($66.7 million) has been sentenced to 18 years in prison, according to the Seoul Central District Court on Sunday. 

Seojung Art’s Lee Dae-hee was indicted while in custody in January on charges including fraud under the Act on the Aggravated Punishment of Specific Economic Crimes and violations of the Act on the Regulation of Conducting Fund-Raising Business Without Permission.

“This was a new type of fraud that cunningly exploited the public’s interest in art as a safe investment vehicle […] which makes the levity of the crime extremely severe,” the court said in its ruling on Tuesday.

“Many victims, having lost most of their assets under the pretext of high-value art, are suffering serious financial and psychological harm, and the scheme has also undermined trust in the domestic art market as a whole, causing enormous harm to society.”

The court also ordered the defendant to provide a provisional payment of approximately 14.19 billion won. 

From 2016 until last year, Lee held seminars to recruit investors, assuring them that if they purchased artworks and entrusted them to the gallery, the pieces would then be exhibited or rented to companies. Backers were promised a steady monthly copyright royalty of about 0.8 percent, with their principal returned at the end of their contract.

In 2023, Lee also deceived victims by selling fractional shares of artworks through dealers and promising to distribute any resale profits according to each investor’s share. In the process, Lee was found to have illegally taken in 83.3 billion won through 2,203 transactions without the required authorization or registration from regulators.

However, Seojung Art had no actual capacity to generate the high returns promised by Lee, and some of the artworks offered as investments either did not physically exist or had already been sold to other buyers.

It was essentially a classic Ponzi scheme, using money from new investors to pay back the principal and returns owed to earlier investors. Lee also personally pocketed roughly 14.1 billion won of the funds taken from 981 victims. 

During the trial, Lee argued that the dealers who had recruited investors should be treated as accomplices and that the money they brought in should be excluded from the total damages. The court rejected this argument, as “there is no evidence showing the dealers were aware of the Ponzi-style structure and knowingly took part in the scheme.”

The court also noted that no meaningful measures had been taken to compensate those affected since the case came to light. With most victims petitioning for a harsh sentence, the court concluded that a lengthy prison term was unavoidable.

BY KO SEUNG-PYO [[email protected]]