Cryptocurrency Fraud Worth 100 Bln Won Busted in South Korea

On June 12, 2020, the Seoul Metropolitan Police announced investigating a cryptocurrency scam project run by three fraudsters having collected about 100 billion won (approx. $83.1 million USD).

According to the report by a local media, the company under investigation is called 'EtherWallet'. It is a fake investment project that recruited over 20,000 members in the name of making profit through digital currency investment. However, investors have been unable to withdraw any money since 2019.

Criminals exposed

The main developer and manager of EtherWallet was identified as Mr A. On the Internet, this person was known as ‘Dr. Dan Shin’. The names of the other scammers (who were attracting and persuading investors to join) behind this fraud are not yet disclosed by the authorities for security and investigation purposes.

Police investigations started way back in January after receiving several complaints from more than 430 victim-investors. The police believe that over 1,000 new complaints are expected to come in and registered any time soon. The real amount of damage is not yet clear, but it is already estimated in millions.

If found guilty (under the Act of the Aggravated Punishment), the crypto-scammers might be sentenced for more than 15 years in prison, just like what happened to the CEO of Coinup cryptocurrency exchange Kang Seok-jung, that was jailed for 16 years and other executives imprisoned for 11 years after being found illegally participating in an investment fraud (between August 2018 to February last year) and stole investors’ money of about 450 bln won (approx. $374.6 million).

Avoid investment scams

In fact, EtherWallet is far from being the only project of a kind. Most of such companies use the good old scheme presented by Sergei Mavrodi in his MMM pyramid. Basically, they attract investors offering high returns and referral bonuses. Some of the first participants might even get their return as it happened in the MMM. But as soon as money inflow gets weaker, the project operators vanish along with the remaining money.

Any project of the kind is able to exist until there is a stable money inflow from new participants. Although many of them claim they take participants’ money for investment, most often it is a lie. First of all, any kind of investment bears some associated risks, so a legit company would not promise stable and high returns. Therefore, a profit from actual investments will be variable.

Unfortunately, there are numerous fake investment projects on the Internet now. Most of them work for a couple of weeks and then vanish. They attract people by paying out small amounts of money as a return. But as soon as a person invests a larger amount, it becomes impossible to withdraw it back, let alone getting any return. 

Surely, there probably are legit projects that actually invest participants’ money and bring them some profits, but people should be very careful and thoroughly investigate a company before investing in it.