South Korean Police Unmask $19M Bitcoin Ponzi Scheme in Gangnam

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Law-enforcement officers have caught a group of crypto scammers who defrauded at least 56,000 victims out of nearly $19 million.



The Seoul Special Judicial Police Bureau for Public Safety has arrested the architects of the Bitcoin-fuelled Ponzi scheme that allegedly generated revenue amounting to almost $19 million. According to the report from local media outlet Korea JoongAng Daily, about 56,000 victims had been affected by the fraudulent scheme.

How It Worked

South Korean police arrested two CEOs of M-Coin, a ‘members-only’ shopping website and cryptocurrency exchange in Gangnam, Southern Seoul. Law-enforcement officers also identified ten other accomplices involved in the scam. The fraudsters targeted mostly people with a poor understanding of blockchain technology, like elderly people in their 60’s and 70’s, and housewives.



As always with such schemes, the bad actors promised their victims free M-Coin token (which were unlisted and thus worthless) and other bonuses for bringing in more investors.  New members were offered to pay a regular annual or ‘premium’ membership fee. There was also a 10-year membership that included discounts on various events, even funerals. Above all, the fraudsters promised a huge profit to those investing in their tokens.

All in all, for the six-month period following May 2018, the swindlers had managed to dupe about 56,000 people and defraud over $18.5 million from them, the police claim. The scheme turned out to be such a success that it expanded to 200 offices working to recruit more investors.

AI vs. Criminals

Interestingly enough, the police bureau reported that it had tracked down the M-Coin scammers with the help of an ‘artificial intelligence (AI) investigator.’ It’s a special program used to search for and identify advertisements and other suspicious content.

“Through keywords such as Ponzi, loan and recruiting members, we were able to teach the AI patterns of Ponzi schemes,” a member of the investigation team explained to Korea JoongAng Daily.

Unfortunately, South Korean authorities might use the recent case as another argument for the restrictive approach adopted by the country towards the cryptocurrency industry. While the government says that it’s ready to promote blockchain technology, it still opposes its use cases related to cryptocurrencies.

This thwarts fostering innovations in the country and discourages regulators from creating sensible policies this early in the game.

Do you believe that scam cases like this might stop South Korea from softening its legal approach towards the cryptocurrency industry? Let us know your thoughts in the comments below! 


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Tanya started as a financial news feed translator and worked as a financial analyst, news editor and content creator in various Russian and Foreign media outlets. She came to the cryptocurrency industry in 2016.

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