Beware of the Rapidly Increasing Virtual Asset Ponzi Schemes

[Asia Economy Reporter Song Hwajeong] Recently, as interest in virtual assets has grown, fraudulent fundraising schemes disguised as such have been rampant, deceiving consumers.

According to the Financial Supervisory Service (FSS) on the 30th, reports and tips related to fraudulent fundraising received by the FSS's "Illegal Private Financing Reporting Center" last year totaled 307 cases, more than double compared to the previous year. In particular, allegations related to virtual assets have significantly increased. Last year, there were 31 cases, nearly double the 16 cases from the previous year.

Fraudulent fundraising refers to the act of raising funds from an unspecified number of people under the pretense of investment, deposits, or savings without permission, licensing, or registration, promising returns exceeding the principal. Fraudulent fundraising related to virtual assets has occurred in various forms, such as selling self-developed virtual assets, investing in exchange businesses, entrusting virtual asset investments, and pretending to sell virtual asset mining.

In a case of fraudulent fundraising disguised as virtual assets, Company A held investment briefings through about 10 centers nationwide, claiming to have developed promising virtual assets and showed false price charts to solicit investments. They explained that the virtual assets were sold at prices lower than the market price, guaranteeing the principal immediately upon investment, and presented a multi-level marketing method and commission program through a virtual asset marketing company.

Company B, operating a virtual asset exchange and claiming to have developed its own virtual assets, enticed investors by guaranteeing the principal plus a fixed 300% return. They promised to pay dividends of 100,000 KRW twice a week and recruitment commissions until the investment principal reached 300% for a 6 million KRW investment, and after reaching 300%, additional commissions would be paid under product renewal conditions. Especially after the enforcement of the Act on Reporting and Using Specified Financial Transaction Information (Special Act on Financial Transactions), they misled investors by saying high-yield investments might be difficult and induced quick investments through multi-level marketing.

Company C promoted that they possessed payment technology capable of quickly and safely converting fiat currency into virtual assets through their developed technology. They solicited investments by promising a fixed daily return of 0.5% up to 300%, guaranteeing not only the principal but also high returns.

Company D claimed to own a promising platform distributing games and videos and promoted that they developed virtual assets usable on this platform, which were scheduled to be listed on a famous exchange. The management impersonated professors from prestigious universities and former employees of large corporations, advertising guaranteed monthly returns of 3-12% to attract investments.

Company E raised funds by claiming that investing in virtual assets through their developed trading system via leading and discretionary management guaranteed high returns without risk. They misled investors by saying that if the program was simply turned on, copy trading would automatically execute trades as they led, guaranteeing a daily return of 5-10% on the investment principal with a 99.9% probability.

An FSS official explained, "Taking advantage of the virtual asset investment craze, fraudulent fundraising operators disguise themselves as virtual asset or related businesses, targeting elderly and other investors unfamiliar with these assets by holding investment briefings and using multi-level recruitment methods to deceive them with promises of principal and high returns." They added, "Fraudulent fundraising operators tend to embezzle and disappear with the investment funds after raising money."

The FSS urged that to prevent fraudulent fundraising damage, if funds are solicited with promises of principal and high returns, one should first suspect fraudulent fundraising. They advised being especially cautious when high recruitment commissions are offered and to always verify whether the entity is a regulated financial institution before investing.

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