[Case Result] Fraud Charges Dismissed (Non-Indictment)

[Case Result] Fraud Charges Dismissed (Non-Indictment) in Pilates Center Closure Case

Hello, this is the Law Office of Bom Lee.

In today’s challenging economic climate, many membership-based businesses, such as pilates studios and gyms, are forced to close due to financial hardship. Often, when memberships are not refunded, business owners find themselves facing criminal charges for fraud.

We recently represented a client who was accused of defrauding over 90 members during the closure of a pilates center. Despite significant unpaid rent and numerous complaints, we successfully secured a "Decision Not to Transfer" (Non-Indictment/Exoneration) from the police.

1. Key Criteria: How Authorities Define "Fraud" in Business Closures

When a business fails, the prosecution and police examine whether the owner had "fraudulent intent" at the time of payment. The decision usually hinges on:

Awareness of Insolvency: Did the owner recruit new members knowing that the business was no longer viable?

Ability to Provide Service: Was there a realistic plan or ability to provide the promised classes at the time the tuition was collected?

Misleading Promotions: Did the owner run "special events" or discounts just before closing to maximize collections?

2. Case Overview

The client was a co-representative of a pilates center that faced severe financial distress, including:

Unpaid Rent: Approximately 28.5 million KRW.

Unpaid Utilities: Approximately 14.9 million KRW.

Claims: 91 victims claiming total damages of approximately 62 million KRW.

3. Our Defense Strategy: Why the Charges Were Dismissed

We built a strong defense based on two primary arguments that led to the Non-Indictment decision:

A. Lack of Fraudulent Intent Prior to Insolvency

The investigation confirmed that for members who signed up before the point when financial distress became critical, there was insufficient evidence to prove that the client intended to deceive them. At that time, the intent was to provide legitimate services.

B. Absence of Conspiracy (Co-Representative Liability)

Although our client was a co-representative and an investor, we proved through testimonies that they were not actively involved in the day-to-day operations or financial management of the center. We successfully argued that there was no "meeting of the minds" or conspiracy to defraud members.

4. The Result: "No Suspicion" (Evidence Insufficient)

The police concluded that there was insufficient evidence to support the fraud charges for both the initial and later periods of the center's operation. The case was closed without being referred to the prosecution.

💡 Legal Insight

Closing a business due to financial failure is a civil matter, not necessarily a criminal one. However, without a strategic legal defense, owners can be unfairly branded as "fraudsters."

If you are facing criminal investigations due to business insolvency, it is vital to prove your lack of intent and clarify your specific role in the business from the very beginning of the investigation.

Are you facing a similar legal challenge? Contact the Law Office of Bom Lee today for a consultation. We are committed to protecting your rights and your reputation.

Law Office of Bom Lee