‘Check Kkang’ counterfeit-check king gets 5 years in $15M bank swindle

The leader of a large-scale bank account “bust- out” scheme that used counterfeit checks to swindle Southland banks out of at least $15 million was sentenced Thursday to more than five years in federal prison.

Jae Ho Chung, 46, of Westwood, was also ordered to pay more than $2 million in restitution to various financial institutions, according to the U.S. Attorney’s Office.

Chung was arrested in May 2014 after arriving at Los Angeles International Airport on a flight from Mexico. More than a dozen people were arrested two years ago in the case dubbed “Operation Check Kkang,” named for a Korean term that describes check kiting.

Chung had been charged in Los Angeles days earlier with running a scheme in which co-conspirators deposited bogus checks into bank accounts and then immediately withdrew the funds. Once the financial institution realized that the check was fraudulent and dishonored the deposit, the account was “busted.”

According to a 26-count indictment, Chung and an accomplice acted as “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.

Chung “exploited a weakness in the banking system that was designed to accommodate and generate goodwill for banking customers by permitting provisional credit instead of requiring lengthy bank ‘hold’ periods,” according to a pre-sentencing memorandum prepared by Assistant U.S. Attorney Mark Aveis.

“By directing his underlings to hop from one branch to another to deposit bogus checks — serially, from one branch to another to another on the same street and oftentimes only minutes apart — then withdraw funds from the same bank’s branches, but in another county, defendant showed that he understood the weakness and exploited it solely to fund his expensive lifestyle and gambling habit,” the prosecutor wrote.

More than a dozen people were arrested two years ago in the case dubbed “Operation Check Kkang,” named for a Korean term that describes check kiting.

Chung pleaded guilty to a pair of federal bank fraud charges last year before U.S. District Judge John A. Kronstadt, who imposed the 63-month sentence Thursday.

— City News Service