Gyeonggi Special Judicial Police Crack Down on 'Illegal Multi-Level Marketing Company' Embezzling Hundreds of Billions in Investment Funds

[Asia Economy (Suwon) = Reporter Lee Young-gyu] Gyeonggi Province has uncovered a large number of companies that recruited members by promoting pet dog platforms or online financial technology companies and then embezzled hundreds of billions of won in investment funds through illegal multi-level marketing schemes.

On the 20th, the head of Gyeonggi Province’s Special Judicial Police for Fair Trade announced that due to repeated reports of damages caused by illegal multi-level marketing targeting those seeking high returns with small investments, and judging that the damage to residents is severe, investigations were conducted from March to June. They uncovered three violations of the Act on Door-to-Door Sales, etc., involving a total of 15 people.

The special judicial police explained that the number of victims of these unregistered illegal multi-level marketing organizations reached 23,000, and the total amount embezzled illegally was estimated at 79 billion won.

In a specific case, Company A was caught after victims reported its operation of illegal multi-level marketing using a pet dog platform. Company A lured victims by promising returns of 150% to 234% if they deposited between 1.2 million won and 30 million won, using devices that identify dogs by their nose wrinkles, pet funeral services, insurance, and theme parks as bait. They also created a seven-level promotional rank structure, paying sponsorship commissions worth between 600 and 20,000 dollars per rank in coins with no monetary value. So far, Company A has illegally embezzled about 10 billion won through 15,000 members, many of whom were elderly people in their 60s to 80s.

Company B, an unregistered illegal multi-level marketing company disguised as an online financial technology firm, established four corporations since 2014 and posted false and exaggerated advertisements on 13 internet sites claiming that "just a few clicks can earn a lot of money in a short time" to recruit members. Company B divided members into three tiers and required each new member to pay between 300,000 won and up to 2.97 million won depending on their tier. Using a Ponzi scheme method, paying interest or dividends to existing investors with the money from new investors at each stage, Company B has recruited 8,000 members and illegally collected about 44 billion won in investment funds.

Companies C and two others conspired to recruit multi-level investors after signing contracts with business outsourcing firms. They disguised contract recruiters as multi-level salespeople and falsely promoted investments to an unspecified number of people, operating illegal multi-level marketing organizations with more than three levels. They also placed false and exaggerated advertisements in major daily newspapers hiding the multi-level marketing nature of the business and promising high returns to attract investors. Furthermore, by inducing investors to invest redundantly in the three companies and falsely promising sponsorship commissions of 5% to 7% relative to the investment amount, they embezzled about 25 billion won from 300 investors.

According to the current Act on Door-to-Door Sales, etc., establishing, managing, or operating unregistered multi-level marketing organizations and engaging in monetary transactions using such organizations are punishable by imprisonment for up to seven years or fines up to 200 million won.

Kim Young-soo, head of the Gyeonggi Province Special Judicial Police for Fair Trade, said, "Cases of people falling into the temptation of earning high returns with small investments in a short time and getting involved in illegal multi-level marketing, or even investing without knowing it is illegal, are increasing," and urged, "To prevent the spread of consumer damage, residents who have suffered losses should actively report these cases."

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