South Korean authorities last Thursday busted a crypto-related Ponzi scheme 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. 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).
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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.