Scammers lured victims into bitcoin Ponzi schemeSwindlers who used a bitcoin Ponzi scheme to rob around 56,000 people of over 21.2 billion won ($18.7 million) were arrested last Thursday.
The swindlers lured people with scant knowledge about the digital currency, mostly elderly people, housewives and retirees, with recruitment bonuses and free cryptocurrency.
The Seoul Special Judicial Police Bureau for Public Safety arrested the CEOs of an online shopping website and a bitcoin enterprise, identified by their surnames Lee and Bae, and booked 10 others for recruiting members through an illegal Ponzi scheme for six months starting in May 2018.
The bureau, which operates independently from the police, is made up of Seoul civil servants who are granted investigative power. They were able to catch these swindlers through what they call an “artificial intelligence [AI] investigator.”
“Through keywords such as Ponzi, loan and recruiting members, we were able to teach the AI patterns of Ponzi schemes,” said Hong Nam-ki, the section chief of the bureau’s second investigation team. “The program can also identify advertisement patterns and identified the enterprise in question, which [was caught] with evidence provided by an unnamed informant.
“In our stakeout, we saw that most people attending the swindler’s presentation for membership were elderly people in their 60s and 70s,” Hwang added.
According to the bureau, the CEOs set up a members-only shopping website and a cryptocurrency exchange in Gangnam, southern Seoul, in June. The website recruited members for an annual fee of 330,000 won or a premium membership fee of 990,000 won, and offered a 10-year membership that included discounts on lodging, leisure and events like funerals and weddings.
The conspirators did not stop there. The website rewarded members with 60,000 won in cash for recruiting one member and gave another 120,000 won to the initial recruiter if the new member got another person to join. This incentive applied to all members who participated in recruiting members, establishing an intricate Ponzi scheme.
Members who recruited other members to the website were awarded with 600 of the cryptocurrency exchange’s unlisted currency, M-coin. The currency was also sold for 100 won to 500 won for a single token.
Lee and Bae told investors that M-coin would rise in value from 200 won to 600 won, and that investors who bought it immediately would profit.
There were about 201 business offices run by the cryptocurrency exchange. The managers of each office were given 20,000 won for each additional member when they hit a quota of 20 members.
The scam remained hidden, as CEOs hid their firm’s accounting information in a corporate server in Japan, which included data about their members and cash flow. When an investigation was launched onto their operation, they moved their accounting office to a private house. They went as far as to hide a computer in an employee’s car trunk and used the computer when needed.
Through the scam, the CEOs made the roughly 21.2 billion won from membership fees and selling cryptocurrency, the bureau said.
BY JUNG MYUNG-SUK, LEE SANG-JAI [firstname.lastname@example.org]