Investment scams trap victims

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Investment scams trap victims

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Last year when a close friend told her about an investment opportunity that would double her investment, the 54 year-old housewife surnamed Byun was skeptical. But then her friend assured her up to 200 million won ($180,466) would be guaranteed, and Byun decided to go check the company out in person.

She met a middle-aged man who started explaining the investments using terms she has never heard before.

He said his company was making 10 percent profit every month on the foreign exchange, trading New Zealand and Australian currencies as well as technologies.

He told her she could get a 3-percent profit, with all of her investment principle guaranteed. When she asked him about forex trading, he gave an ambiguous answer.

Byun’s trust was solidified when the man told her that Finland’s government was backing the company and therefore it could guarantee a maximum of 200 million won for each investor. As she believed that the Finnish government was involved, Byun put down 50 million won, but not only did she not receive a single dime on her investment, it turns out the investment company didn’t even exist.

Such fake financial investment companies have been flourishing as the central bank is keeping the key interest rate low at 1.25 percent. The Bank of Korea, in the hopes of boosting the economy, unexpectedly shaved off 0.25 percentage points off the key interest rate in June.

According to the Financial Supervisory Service on Monday, the number of such fraudulent acts reported to the FSS in the first half amounted to 298 cases, which is a 242 percent increase compared to the same period a year ago.

Among the 298 cases, 64 have been turned over the to the police and prosecutors’ office on criminal charges. That is a 64.1 percent increase compared to the 39 cases that were turned over to authorities the year before.

It is not just the number of cases that have increased, either. In addition, the means of fraud have become more diverse. One popular form that has been spreading recently is where the one that the 52 year-old housewife was suckered into. In this form, swindlers will attract investors using unfamiliar financial jargon and claiming they can make huge profits through foreign exchanges and futures options.

Some use recent high-tech developments such as virtual currencies like bitcoins and smartphone apps in order to attract their victims.

One company claimed that it has developed a virtual reality currency much like bitcoin, and when investing 1.21 million won the investors can receive 1.4 million won worth of the virtual reality currency. The company claimed that the virtual reality currency can be used as real currency when purchasing goods at traditional markets or paying parking fees. Additionally, they said not only could investors use the virtual currency to paying public bills such as gas and phone bills, but that they would also get 5 to 6 percent discounts when renting cars, going to gas stations or shopping at large discount stores.

They went on to say investors would make huge profits when the company went public.

One company said it had developed an app that can translate 89 languages and that investors can make more than 400 percent back on their investments. Others said they had developed their own Facebook and could make profits from advertisements. Still others claimed investors would profit handsomely by subscribing to a gem-mining fund that would make them the owner of a gem mine in the Dominican Republic.

One company said it owns a farm in Malaysia that extracts substances out of Agarwood, which is used in soaps and toothbrushes, and that investors could profits once the company went public on the Nasdaq.

“Companies that promise high returns are likely to be fraudulent,” said Kim Sang-rok, head of the anti-illegal financial service team at the FSS, “and investors need to check whether these companies have received any government approval.”


PARK JIN-SEOK [lee.hojeong@joongang.co.kr]






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