Fake financial Web sites prey on small investors

While Korea is considered as one of the most wired countries in the world, data showed yesterday that the number of Web sites that offer illegal financial investment services has reached over 1,500 in the past year.

According to the Financial Supervisory Service yesterday, from last July to June this year, a total of 1,552 illegal financial investment Web sites were found to be operating online, whose profit was made by disguising themselves as legal financial investment companies and attracting individual investors to entrust their money to them.

The latest number of illegal Web sites that have been uncovered by the FSS’s cyber financial trading monitoring team is up 426.1 percent compared to the same period in the previous year.

“There are many illegal financial investment businesses operating in cyberspace that victimize mainly retail investors by alluring them to click on their banners, for example, and attract them to sign up [on their computerized investment programs] and entrust their investments to them,” said an official from the FSS.

“Most of these illegal businesses were shown to have attracted investors with a ‘get-rich-quick’ approach.”

The FSS said that of the 1,552 Web sites, 995 of them have been shut down.

From March 2010 to May 2012, a joint task force consisting of officials from the FSS and other related bodies including the Korea Financial Investment Association has attempted to clamp down on illegal financial investment businesses.

However, the outcome was dissatisfying. In 2010, only 100 illegal Web sites were discovered and 295 in 2011. With the limit the FSS saw, in June, last year, the financial regulator formed a cyber financial trading monitoring team and enhanced monitoring.

“As we focused on monitoring illegal financial Web sites, we found 1,552 of them to be operating illegally,” the official said, noting that a majority of them were Web sites run by unauthorized investment brokerages. “The Web sites were in various forms including home pages, online cafes and blogs.”

According to the FSS, illegal brokerage companies make profits by alluring retail investors through mobile text messages, online banners, Internet cafes and blogs, convincing them that their businesses have been officially authorized by the country’s financial regulator.

They then advise investors to download their own home trading service program to their computers to enable them to make futures stock exchanges.

“After some time when investors request illegal brokerage companies to realize their stock profits, companies intentionally break down their servers and disappear,” the official said. “These illegal brokerage companies then set up new Web sites and resume operations.”

BY LEE EUN-JOO [angie@joongang.co.kr]