When you are accused of fraud for not repaying a loan

In loan fraud cases, the first thing investigators look at is whether, when you borrowed the money, you intended and were able to repay it. If you could not repay because your business struggled or your income stopped after borrowing, it may remain a civil matter. On the other hand, if from the start you had no way to repay but said you did, or lied about what the money was for, it can be fraud (사기).

So what matters is not your current situation but your income and assets around the date you borrowed, your other debts and where the borrowed money actually went. If you borrowed several times, each loan is looked at separately. If you could repay the first loan but had no way to repay by the time of the last one, only that part may be a problem.

The Criminal Act (형법) was amended on December 23, 2025, raising the statutory penalty for fraud to imprisonment of up to 20 years or a fine of up to 50 million won (Criminal Act Article 347). For acts committed before the amendment, the previous penalty of up to 10 years' imprisonment or a fine of up to 20 million won applies. If the amount gained is 500 million won or more, the Act on the Aggravated Punishment of Specific Economic Crimes (특정경제범죄 가중처벌 등에 관한 법률) applies and the penalty is heavier.

Most posts online saying fraud carries up to 10 years are based on the old rule. The statute of limitations for fraud is 10 years (Criminal Procedure Act (형사소송법) Article 249(1)(iii)), so people are sometimes accused belatedly over things that happened years ago.

Download the transaction history for the relevant period as a PDF from your banking app, and save the entire chat using the export function. Cutting out only the favourable parts actually raises suspicion. If the money was received in an account not in your name, you also need to be able to explain why.

• Messages exchanged and any IOU from when you borrowed the money
• Payslips, bank balances and asset records from around the time you borrowed
• Transaction records showing where the borrowed money was actually spent
• Records of repayments made so far (even partial)
• Materials showing why you became unable to repay (business closure, job loss, illness, etc.)

Saying things like "things were a bit tight then" or "I meant to pay it back somehow later" can be read as meaning you had no ability to repay when you borrowed. Do not guess at amounts or dates you do not remember exactly; say you will check the records and submit them separately.

First find out what the complainant says was a lie, for example what you are supposed to have said about the purpose, the repayment date or collateral; only then can you work out how to answer. If you bring a one-page table showing, for each date you borrowed, the amount, the purpose and how much you repaid, you can answer questions without being thrown.

If you are in touch with the complainant, do not send emotional messages. If you make a new promise to repay with a date you cannot meet, that promise can look like another lie. Put any repayment plan in writing, within what you can actually keep to. When replying to demands for payment, avoid wording that admits things that are not true.

The test is similar even when it is not a loan, such as payment for a second-hand sale or an investment. It looks at whether, when you received the money, you intended and were able to keep your promise, and whether you used the money as you said you would.

Fraud is not an offense where the case ends just because the victim does not want punishment. Even if you repay in full and settle, you can be punished if the allegation is made out. However, compensating the victim weighs heavily in deciding the outcome and sentence, such as a suspension of indictment (기소유예), a fine or a suspended sentence (집행유예). A record of paying back little by little since before the complaint also shows that you intended to repay.

You can also repay while disputing the allegation. In that case, it is better to word the settlement agreement so that the repayment is not read as admitting wrongdoing. If it is a matter between family members, prosecution requires a complaint (Criminal Act Articles 328 and 354), so check the relationship first.

At the consultation, we put together the materials from around the date you borrowed in time order and decide with you whether to dispute or admit the allegation. We practise likely questions with you and attend the questioning, and afterwards we submit a defense counsel's written opinion bringing together your repayment history and materials. If you have been summoned, contact us first through the chat on this page.