Seoul City Issues Warning Amid Rising Reports of Cryptocurrency Pyramid Scams...

Multilevel Organization-Like Operation, Targeting 50-70s Without Cryptocurrency Knowledge, Expected to Cause Harm

[Image source=Yonhap News]

[Asia Economy Reporter Lim Cheol-young] Recently, as the cryptocurrency investment craze, including Bitcoin, has surged, reports of suspected multi-level marketing (MLM) fraud using cryptocurrencies have been continuously received in Seoul. Most cases involved recruiting members through MLM methods targeting middle-aged and elderly people in their 50s to 70s, who have fewer opportunities to acquire related information, and luring them with promises of high returns.

On the 21st, the Seoul Metropolitan Government's Civil Life Judicial Police Unit issued a "Cryptocurrency MLM Fraud Warning" and urged special caution to prevent cryptocurrency MLM fraud cases.

The main cases reported to Seoul included: ? recruiting members by advertising partnerships with globally famous companies and distributing profits in a Ponzi-like manner; ? enticing investors with rosy prospects of their own coin, but raising doubts about the possibility of coin value appreciation; ? using coins with unclear listings as bait to lure investors; ? issuing coins to members during recruitment that later became non-tradable, making cash conversion difficult.

The common feature was that the operations resembled MLM organizations where commissions are paid to higher-tier members each time many lower-tier members are recruited. Investors were recruited by paying commissions in cryptocurrency when bringing in new members or achieving performance.

Along with these major cases, Seoul proposed three key preventive measures that citizens should pay attention to. As the virtual asset market grows, reports of cryptocurrency-related damages are rapidly increasing and the methods are becoming more sophisticated daily, so it is explained that investors should fully recognize the risks and make careful judgments. In particular, cryptocurrencies are not yet legally recognized as money or goods in precedents, so even if damages occur, it may be difficult to receive relief through judicial institutions.

First, caution is advised if investors repeatedly execute orders of the same size on cryptocurrency exchanges. This could be a case where MLM organizations deploy accomplices who have pre-agreed to repeatedly order self-developed coins on-site, manipulating the market to appear active.

Also, if a company urges investment in its coin by claiming that its value will rise significantly once listed and asks investors to entrust the coin to the company, it is recommended to be cautious about such investments. This corresponds to a type of unauthorized fundraising and carries a high risk of fraud. Unauthorized fundraising refers to raising funds from unspecified many people without obtaining permits or registrations under laws such as the Banking Act or the Savings Bank Act. Engaging in unauthorized fundraising can result in imprisonment of up to five years or a fine of up to 50 million KRW under relevant laws.

It is advised to conduct thorough prior investigation when joining as a member based solely on acquaintances. If you recruit other investors, you must be especially careful because if damages occur later, you could unknowingly become a perpetrator who caused harm to others.

The Seoul Civil Life Judicial Police Unit urged citizens who witness suspicious cases to actively report them through the Seoul Metropolitan Government website’s response center and the Civil Life Crime Reporting Center. Rewards are also provided to whistleblowers. According to the Seoul Metropolitan Government Ordinance on Protection and Support for Public Interest Whistleblowers, rewards may be given to public interest whistleblowers. In 2019, Seoul paid the highest reward of 30 million KRW to a whistleblower who reported illegal MLM activities among public interest crime reporters.

Choi Han-cheol, head of Investigation Team 1 of the Seoul Civil Life Judicial Police Unit, said, “Recently, various cryptocurrencies have been emerging like mushrooms after rain, and vulnerable groups without related knowledge tend to equate them with Bitcoin, thinking they are golden geese laying golden eggs, and easily jump into investments. Especially, middle-aged and elderly people in their 50s to 70s, who have fewer opportunities to acquire knowledge about cryptocurrencies, are becoming major targets. Significant damages that are difficult to recover are expected. Citizens should thoroughly understand the risks before investing and invest cautiously.”

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