[The Police File] Repeated 'Ponzi Schemes': Beware of This Method

Although there are differences by country, the most common crime worldwide is ‘theft.’ However, in Korea, ‘intelligent crimes,’ which mainly involve embezzlement, forgery, and especially fraud, occur most frequently. According to the ‘2021 Crime Overview and Major Indicator Crime Analysis’ report published by the National Police Agency, intelligent crimes including fraud ranked first in 2021 with 361,107 cases. In particular, intelligent crimes have continuously ranked first since 2019, surpassing traffic crimes.

Fraud crimes continue to evolve with the times, but their basic framework remains unchanged. Among them, the most ‘traditional method’ is the ‘Ponzi scheme.’ The Ponzi scheme is named after Charles Ponzi, who carried out this type of fraud in the United States in the 1920s. Ponzi’s fraud was simple. He recruited investors by promising high returns under the pretext of investing in international postal coupons, but in reality, he paid returns to existing investors using new investors’ money rather than business income, thereby expanding the scale and receiving enormous investments in a short period. Simply put, it was a ‘rolling over’ investment. Eventually, when suspicious investors demanded the return of their principal, Ponzi could not pay them all, and his fraudulent method was exposed.

Recent controversies such as the Soci?t? G?n?rale (SG) Securities stock crash and the Terra·Luna incident are also based on Ponzi schemes. The common pattern in these cases is presenting unrealizable fictitious returns and attracting investors’ money.

To avoid Ponzi schemes, it is essential to recognize their characteristics. Ponzi schemes always promise high returns, even when market interest rates are negative. In the 2009 ‘Madoff case,’ which shook the global financial world, Bernard Madoff claimed that his investments were the only ones yielding positive returns despite most investments and funds recording negative returns due to the financial crisis. Eventually, market analysts found this suspicious, and his criminal activities were uncovered.

Another characteristic of Ponzi schemes is an unclear portfolio. When asked, “How can you achieve such high returns?” the answer is usually, “Just trust me and follow.” Since such high returns cannot be achieved through common and ordinary investments, fraudsters cannot explain their investment methods. This is where plausible lies come in. They show already manipulated high return distribution tables to gain trust and introduce themselves as managers of secret funds for conglomerate chairmen or politicians, or as members of secret financial organizations. Although these stories are absurd, many people are deceived and invest large sums of money.

Recently, there was a controversy in Korea involving a famous app that offered more than a 20% discount when charging a certain amount as points, which turned out to be a scam. In 1997, in Albania, 60% of the population fell victim to a Ponzi scheme, leading to violent incidents. Jo Hee-pal and Joo Soo-do also used Ponzi scheme methods.

It is impossible to make money through Ponzi schemes. Even if short-term profits are gained through Ponzi schemes, the perpetrators induce reinvestment of those profits. If people are tempted to recommend investments to family and acquaintances, the situation worsens. Although times are difficult and challenging, it is important to remember the investment adage, ‘There is no free lunch.’ Sudden windfalls do not come to just anyone.

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