Cryptocurrency Pyramid Scheme Busted in South Korea - $250 Million Stolen

Prosecutors in Incheon, South Korea, have indicted 21 suspects for their involvement in a multi-million dollar, international pyramid scheme based on cryptocurrency mining.

Pyramid scheme, to the max

The suspects worked for Las Vegas-based mining agency, Mining Max. They stand accused of scamming 18,000 investors in 54 countries, pocketing 270 billion won (USD 250 million) between September 2016 and October 2017, according to report from Yonhap news agency.

Three additional people are accused of lesser charges of embezzlement and are not being held, notably singer-songwriter Park Jung-woon. Another seven have escaped arrest - Interpol has been alerted as the chairman and vice chairman of Mining Max have skipped the country.

Mining Max "specializes in providing premium Cryptocurrency cloud mining rigs," according to its website. "All of the mining rigs are assembled and maintained in our Internet Data Centers (IDC) in Korea." It focused on mining Ethereum Ethereum Ethereum is an open source, blockchain-based distributed computing platform and operating system featuring smart contract functionality. Created in 2014, Ethereum now stands as the second largest cryptocurrency by market cap at the time of writing.As a decentralized cryptocurrency network and software platform, Ethereum represents the most prominent altcoin. Ethereum also enables the creation Distributed Applications, or dapps. Understanding EthereumEthereum boasts its own programming language, Ethereum is an open source, blockchain-based distributed computing platform and operating system featuring smart contract functionality. Created in 2014, Ethereum now stands as the second largest cryptocurrency by market cap at the time of writing.As a decentralized cryptocurrency network and software platform, Ethereum represents the most prominent altcoin. Ethereum also enables the creation Distributed Applications, or dapps. Understanding EthereumEthereum boasts its own programming language, Read this Term, although its website gives very few technical details.

Seven levels

The firm promised higher returns to people who invested more money. In reality, it graded investors into seven levels, and most of the money was used to buy luxuries for management and reward top level operators for bringing more people into the scam. Only 75 million won was actually used to mine Ethereum, according to the report.

Customers were led to believe that the mining operation was operational by the firm's IT subsidiary, which manipulated the results. However, as with all pyramid schemes, it eventually came apart when the returns did not match the business model sold.

Of the victims, prosecutors estimate that 14,000 investors were from South Korea, 2,600 from the US, 600 from China and the rest from Japan and other countries. Prosecutors estimate that 100 million won have been stashed away in offshore accounts by Mining Max executives.

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