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Police called in on P2P lenders

Financial regulator has sent fraud cases to the police and prosecutors

Nov 20,2018
The country’s financial watchdog has asked prosecutors and the police to investigate peer-to-peer lending firms suspected of embezzlement and fraud, the Financial Supervisory Service (FSS) revealed Monday.

Between March and September, the FSS examined 178 peer-to-peer (P2P) lending firms for the soundness of their lending operations. P2P lending firms connect investors and lenders directly online without requiring them to go through banks.

On Monday, the financial regulator reported that 20 of them may have misappropriated over 100 billion won ($88.72 million) in total. The FSS forwarded cases to prosecutors for investigation and also relayed the information to police.

Executives of three out of the 20 suspected firms have already been arrested or tried, according to the FSS.

Polaris Funding, whose executives were found guilty of fraud and sentenced to four years in jail, uploaded pictures of fake gold bars along with a fake certificate of authenticity and claimed they were collateral. The firm was able to secure 5 billion won of funds from around 500 people, though there was no real borrower and no loan was made.

The executives of Anareits, a popular real estate investing platform, were arrested on charges of misappropriating 30 billion won worth of funds from around 4,000 investors. The CEO of Roof Funding, once the third largest player in the market, was arrested for misappropriating 40 billion won from 8,000 investors.

The names of the 17 other firms whose executives have not been formally charged were not revealed.

“We are not disclosing the names of the rest of the firms as investigations are still ongoing,” said Moon Sang-seok, a spokesman for the FSS.

The FSS reported a wide variety of fraudulent activities. At least two firms lied about their office addresses while another had employees pretend to be borrowers to secure more funds from investors.

“Most of the firms that have misappropriated funds have used the money to pay back investors and invest in the firm’s other businesses,” read the FSS report. “An executive from one firm used funds to buy shares, while another used the money to purchase virtual currency.”

“Many firms, including some of the market’s top 10 players, kept the default rate at zero by using funds from their own company accounts to pay overdue loans,” it continued.

There are currently no laws on P2P lending.


BY KIM EUN-JIN [kim.eunjin1@joongang.co.kr]


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