Get-Rich-Quick Sharpers Woo The Credulous

Illegal paper investment companies are collecting huge amounts of funds by luring investors with promises of high returns, and their number is increasing, the Financial Supervisory Service said Tuesday. The watchdog agency reported 52 such companies to the prosecutor's office this year, twice the number of such referrals as last year. The agency found 126 such cases in 1999 and 2000.

"The number of investment frauds is increasing because these paper companies target investors who are having a hard time finding the right investments due to low interest rates," said an agency official.

A widely used tactic is to pretend that the investments were going into startups. One bogus company told investors that it was investing in a heater manufacturer preparing for Kosdaq listing, and even handed out receipts for deposits. It collected 1.3 billion won ($1 million) by promising 15 percent monthly returns and pledging to repay principal in four months.

Another company wooed investors by promising 6 percent monthly dividends. Some companies advertised that they would grow mushrooms that could prevent the diseases of middle-aged adults.

One company repeatedly changed its name to deceive regulators and escape investigation.

"Collecting funds without registration and permit from the Financial Supervisory Service is considered financial fraud and is a violation of law," said the agency official. "Investors need to be cautious about guaranteed high amounts of fixed return. These companies advertise in locally published papers and gain trust from investors by regularly paying interest in the beginning."

by Chung Sun-gu