Surge in Requests for Investigation of Unauthorized Fundraising Companies... "High Returns Promised, Fraud Should Be Suspected First"

Reports and Consultations Decrease, but Companies Requesting Investigations Increase by 34%

[Asia Economy Reporter Kim Hyo-jin] The Financial Supervisory Service (FSS) announced on the 4th that the number of reports and consultations related to fraudulent investment schemes received by the Illegal Private Lending Damage Report Center last year was 482, a decrease of 407 cases (45.8%) compared to 2018 (889 cases).

The significant decline was largely due to the cooling down of the virtual currency craze, with consultations related to virtual currency disguised fraudulent investment schemes (116 cases) dropping by 80.8% compared to 2018 (604 cases).

The number of companies referred to investigative agencies by the FSS last year for suspected fraudulent investment schemes was 186, an increase of 47 companies (33.8%) compared to 2018 (139 companies).

The FSS explained, "Although the number of consultations decreased, the number of suspected companies increased as multiple companies were involved in a single fraudulent investment scheme, making the scam methods more complex."

Recently, cases involving fraudulent investment schemes related to virtual currency often involved various companies such as main business entities, virtual currency exchanges, and similar electronic payment transaction platforms (~Pay, ~Wallet), resulting in a higher number of suspected companies compared to other types.

Among the suspected companies involved in fraudulent investment schemes, those related to virtual currency accounted for the largest share at 49.5% (92 companies). The proportion of companies impersonating legitimate financial institutions (25.3%, 47 companies) and those related to real estate and other businesses (25.3%, 47 companies) remained the same as last year.

The FSS identified that the increase in the proportion of virtual currency-related suspected companies was due to fraudulent companies incorporating virtual currency into traditional fraudulent investment types such as finance, manufacturing, and sales businesses to lure victims using the latest trending methods.

These companies falsely advertised that continuous profits were generated from their unique business models (casino, solar power generation, gold mining, etc.) and that they created coins linked to these profits, or they made false claims that the principal was guaranteed by defending a certain price level through continuous trading after listing on virtual currency exchanges.

There were also cases where transactions could only be checked through the similar electronic payment transaction platforms (~Pay, ~Wallet) developed by the companies, and when cash-out was requested, they delayed cashing out citing system errors and then absconded or fled.

Fraudulent investment schemes are mainly operated as typical Ponzi schemes, a pyramid multi-level marketing method where incentives are paid differentially based on performance to pay principal and profits to existing members using money from new members, encouraging continuous recruitment of other members.

When refund demands from existing members increase and recruiting additional members becomes difficult, the companies delay profit payments and then abscond, flee, or close down.

It was revealed that the suspected companies boosted trust in their firms by flaunting connections with famous celebrities or influential figures in domestic and international political and business circles to attract investors. Some also recruited through acquaintances or lured funds by promising retirement and principal guarantees.

The FSS urged that if principal and high returns are guaranteed, investors should not be deceived by payment guarantees or certificates of guarantee and should suspect investment fraud first.

The FSS also recommended that when receiving investment solicitations, individuals should first verify whether the company is a regulated financial institution through the Financial Consumer Information Portal, Fine.

If you suffer damage from fraudulent investment schemes, you should immediately report to the police or provide information to the FSS Illegal Private Lending Damage Report Center (☎1332, then press 3).

This content was produced with the assistance of AI translation services.