Cryptocurrency mania creates new fraud forms

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Cryptocurrency mania creates new fraud forms

While the number of financial fraud fell last year, cryptocurrency fraud thrived. In additional, voice phishers claiming to be from government institutions - the police, the Prosecutors’ Office and even the Financial Supervisory Service (FSS) - went up.

According to the Financial Supervisory Service, the number of financial fraud cases reported last year came to 100,247, a 15.2 percent drop from 2016’s 118,196.

The decline was largely due to tougher guidelines on loans, the FSS said, which people take out to participate in fraud.

But fraud involving cryptocurrency increased 38.5 percent thanks to the cryptocurrency mania that picked up in the second half of last year.

There were 453 cryptocurrency fraud cases reported last year, which were 63.6 percent of the reported fraud cases that pretended to offer investments. Many of the cases were pyramid schemes that fraudulently offered people the chance to get in on initial coin offerings (ICOs), which are the cryptocurrency world’s equivalent of initial public offerings.

One company solicited investors between last April and August promising a return of 100 times the initial investments.

The company held investment presentations in major cities including Seoul, Daejeon and Jeonju claiming that it has a patent on an upgraded version of bitcoin. The company claimed investors would not suffer any losses because the newly upgraded cryptocurrency’s value would not drop. Most of the investors who were solicited were in their 50s and 60s. The fraud was organized as a pyramid scheme. It encouraged early investors to rope in friends and acquaintances, and the later investments were paid out to the early investors as returns.

The company raised 19.1 billion won from 5,704 investors. The police discovered that the cyrptocurrency did not exist and the person who claimed to have developed it didn’t even know anything about computers or the so-called mining of cryptocurrency.

A type of voice-phishing fraud targeting women in their 20s and 30s by claiming to be government institutions increased 27.6 percent compared to the previous year, the FSS said.

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