Criminals using cryptocurrency for Ponzi style fraud

Amid the virtual currency investment boom in Korea, cryptocurrency-related fraud cases have been increasing. The scammers, in many cases, lure investors with the promise of huge returns once their coins are listed on the exchange, but then disappear with the money, in a type of Ponzi scheme.

The Gyeongnam Provincial Police said May 31 that it had detained two people from a ring that had swindled 63 investors out of 1.5 billion won ($1.3 million). The suspects had held presentations around the region starting in January 2017, telling potential investors ― falsely ― that global companies such as Amazon and Alibaba were jointly investing in their coin.

They had claimed that the coin would jump more than five times in value once listed on an exchange. They also said that if an individual were to buy 30,000 coins, amounting to 10.8 million won ($9,700), that this person would receive 240 new coins every day. In this scheme, the suspects encouraged the investors to bring in new people, offering the initial investor 10 percent of the new person’s investment as a “commission.”

But according to police, the global companies had no such plan, and the ring did not have, nor was it familiar with, blockchain technology, which cryptocurrencies are based on. The suspects allegedly used the money for their own things, including making investments in better known cryptocurrencies. Most victims were low-income people, and one of them lost 108 million won ($97,500).

In a separate case, on Monday, the Daegu District Prosecutors’ Office indicted members of a group that had swindled 20 people out of 4 billion won ($3.6 million) by offering high returns for investments into their cryptocurrency.

The suspects allegedly told the people that the coin developed in Japan would be listed on a Korean coin exchange, and that the coin would be allowed to be used to buy luxury goods from duty-free stores around the world at low prices. With the money, the head of the ring bought an apartment in Seoul for 1 billion won ($903,000), according to the prosecution.

Senior citizens, who lack information, often fall prey to such swindlers. They typically say that they plan to list new coins on a crypto exchange and that high investment returns are guaranteed. But what really happens next is they simply give money to the first investors with the money they received from the new ones. It thus takes time until the victims realize that the scheme was fraud.

According to the Korean National Police Agency, 333 fraud cases related to cryptocurrency were caught last year, which is more than three times the 103 cases caught during the previous year.

윤자영(2021.06.02) Criminals using cryptocurrency for Ponzi style fraud
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