Mining Max execs arrested for scamming its investors

More than 20 executives and top investors of Mining Max, an American virtual currency mining operation, were arrested for scamming 18,000 investors out of 270 billion won ($248.4 million), prosecutors announced Wednesday. The case is attracting greater media attention because Park Jung-woon, a popular singer from the 1990s, is among the arrested.

Mining Max, headquartered in Las Vegas, is a cryptocurrency mining company that allows individuals to invest in mining rigs, according to the site Bitcoin Exchange Guide. Rigs are machines that create wealth for investors by solving complex mathematical formulae to produce virtual currency. Despite being based in America, the company has all its mining “farms,” where the rigs are located, in South Korea. It is also said to have an office in Los Angeles’ Koreatown.

Investigations found that Mining Max operated a pyramid scheme, awarding original investors with funds brought in by new recruits. Top investors received 100 million to 4 billion won a year, and were lavished with Mercedes-Benz cars, Rolexes and gold necklaces based on their performance.

From September 2016 to this October, Mining Max received 270 billion won from investors who believed they were purchasing mining rigs to earn a steady profit in virtual currency. Its programmers had developed software that could trick investors into believing virtual currency was being mined even if none was.

During that period, the company only spent 75 billion won on operating the rigs, using the rest of the money to distribute to top investors as commission or to create new subsidiaries. Prosecutors believe that Mining Max executives are still holding some 100 billion won abroad.

Mining Max’s schemes were exposed when its chairman and vice chairman, unable to pay investors, went into hiding. The affected investors had specifically invested in rigs that mined ethereum, the virtual currency with the second-highest market value after bitcoin. Though investors from 54 different countries were scammed, the majority of the victims are Korean, making up 14,000 out of 18,000.

On Wednesday, Incheon prosecutors arrested seven executives and 11 investors of Mining Max and its affiliates on charges of fraud and violation of laws on door-to-door sales. Three were arrested for embezzlement.

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