South Korean Man Arrested for $60M Crypto Ponzi Scheme
Key Takeaways
- A South Korean man ran a $60 million Ponzi scheme targeting over 2,200 investors under the guise of AI and crypto businesses.
- The scam promised 300% returns and mainly affected victims aged 50-70, many of whom were unfamiliar with crypto technologies.
South Korean authorities have apprehended a man in his 60s for allegedly masterminding a $60 million Ponzi scheme, even while serving probation for a prior fraud conviction. This information was released in a report by the Yonhap News Agency on Friday.
The suspect, identified as Mr. A, along with six accomplices, is accused of defrauding investors between October 2020 and January 2022. The group organized promotional events in the Gangnam district of Seoul, falsely claiming to operate legitimate businesses in artificial intelligence (AI) and cryptocurrency.
The suspects lured more than 2,200 investors by promising returns as high as 300 percent. Individual investments ranged from approximately $770 to $770,000. The scheme followed a classic Ponzi model, where funds from new investors were used to pay returns to earlier investors, until the scheme eventually collapsed.
Mr. A allegedly recruited family members and acquaintances to manage various aspects of the operation, including finance, IT, marketing, and investor recruitment. Police initiated an investigation in September 2022 following numerous complaints, leading to a two-month search after the suspect disappeared before his pretrial hearing.
The arrest revealed that Mr. A had been serving a two-year suspended sentence since July 2021 for a similar fraud scheme when he launched this new operation. This highlights the importance of robust security measures and audits, such as those offered by Codeum, to prevent such exploits.
“Ponzi schemes are crimes that deserve stronger punishment, as they result in many victims and make it impossible to recover losses,” a police spokesperson stated. They also noted that many victims were between 50 and 70 years old and lacked familiarity with AI or crypto technologies.
Codeum is committed to enhancing security in the blockchain space by providing thorough smart contract audits, KYC verification, and custom smart contract and DApp development.