South Korean Authorities Nabb 12 for $18 Million Crypto Ponzi Scheme

South Korean authorities last Thursday busted a crypto-related Ponzi Scheme Ponzi Scheme A Ponzi scheme is a scam that looks to lure investors, ultimately paying profits to earlier investors with funds from more later investors.This form of fraud tricks victims into believing that products are instead generated from product sales or other means. In actuality, most investors are completely oblivious to the actual origin of incoming funds.One of the central attributes of a Ponzi scheme is the necessity of its ongoing nature, which is dependent on a steady flow of new contributions and A Ponzi scheme is a scam that looks to lure investors, ultimately paying profits to earlier investors with funds from more later investors.This form of fraud tricks victims into believing that products are instead generated from product sales or other means. In actuality, most investors are completely oblivious to the actual origin of incoming funds.One of the central attributes of a Ponzi scheme is the necessity of its ongoing nature, which is dependent on a steady flow of new contributions and Read this Term which duped around 56,000 people for more than 21.2 million won (around $18.7 million).

According to the April 8 Korea Joongang Daily report, the Seoul Special Judicial Police Bureau for Public Safety arrested two CEOs - one heading an online shopping site and the other running a crypto Exchange Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv Read this Term. Apart from the two, authorities also booked ten others, alleging their role in recruiting members to the Ponzi scheme since last May.

The local report detailed that the bureau, an independent investigating body in the country, used sophisticated technologies including “artificial intelligence investigator” to bust the illegal operation.

“Through keywords such as Ponzi, loan and recruiting members, we were able to teach the AI patterns of Ponzi schemes,” Hong Nam-ki, the section chief of the second investigation team, told the daily. “The program can also identify advertisement patterns and identified the enterprise in question, which [was caught] with evidence provided by an unnamed informant.”

According to authorities, both CEOs set up a members-only shopping site and a crypto exchange in southern Seoul in June last year. The websites charged recruits an annual fee of 330,000 won (around $388) or a premium membership fee of 990,000 won (around $865).

Just like any classic Ponzi scheme, the website also assured lucrative compensations for its recruits. Any member bringing a new member would get 60,000 won (around $52) as a reward, and if that new member brings someone else on the platform, the first member would get another 120,000 won (approximately $105).

Moreover, the membership of the website also included discounts on lodging, leisure, and many other events.

Payouts in Crypto

However, the catch was all payouts were done in the crypto exchanges unlisted native token called M-coin. The masterminds assured the victims that the value of the digital token would rise three-fold in the near future.

The bureau also revealed that most of the victims of the scheme were elderly people, housewives, and retirees who did not have much knowledge about digital currencies.

“In our stakeout, we saw that most people attending the swindler’s presentation for membership were elderly people in their 60s and 70s,” Hong added.

With the rise in the adaptation of digital currencies, the number of scams is also growing. Earlier this year, Indian authorities arrested four people for their involvement in a $14 million crypto-related scam.

To prevent potential victims from falling into such traps, regulators around the world are continuously publishing lists of shady-looking websites and businesses.