$365 Million Crypto Scam: South Korean CEO Indicted For Alleged Fraud

South Korean authorities have arrested and indicted the CEO of a tech firm and his accomplice for fraud. The two men are suspected of orchestrating a crypto scheme of over 500 billion won that took advantage of elderly people with false promises of massive returns. The scam is estimated to have over 10,000 members and has affected hundreds of victims.

Crypto Ponzi Scheme Targets Elderly People

Last month, the CEO of tech firm Wacon, Byun Young-oh, and Vice Chairman Yim Mo-Soo were arrested for allegedly orchestrating a crypto scheme worth hundreds of billions of won. The suspects were detained on “suspicion of fraud and other charges” after a court granted the arrest warrants due to “concerns about the destruction of evidence.”

According to local reports, the company, which has offices across South Korea, is suspected of running a Ponzi scheme with an estimated 12,000 members. Wacon seemingly operated “crypto staking products,” including an alleged wallet service named “MainEthernet,” without being registered with the financial regulators.

Wacon used a multi-level method to recruit investors, offering unlimited referral revenue for “introducing acquaintances” to the company’s services. The scam targeted mainly elderly people who were uninformed about cryptocurrencies and what Ponzi schemes are.

Per the reports, investors were offered massive benefits, including a “100% interest” return and earning profits through a “casino-AI platform and other services.” Wacon also claimed to pay “30% on the 40th day and 7% on the 43rd day,” but failed to return investments last year.

In June 2023, investors lost hundreds of billions of won after the company failed to pay the interest and the original investment amount. As a result, South Korean authorities began investigating the company.

Wakon reportedly switched to a new platform several times, forcing investors to move their funds and recruit new subscribers throughout the police investigation.

CEO Indicted For $366 Million Fraud

Last week, the Fifth Criminal Division of the Seoul Central District Prosecutors’ Office, led by Deputy Chief Prosecutor Kim Tae-heon, indicted Byun and Yim for “fraud and fraudulent receipt of funds.”

The investigation alleges that the company defrauded an estimated 500 investors of 54 billion won, worth $39 million, and was responsible for the “fraudulent receipt of approximately 500 billion won,” worth around $365 million.

As the report explained, “Pseudo-receipt is a business that raises funds from an unspecified number of people with the promise of preserving the principal without a license, registration, or notification under the law.”  It also detailed that fraud charges can be applied if it is proven that the money was received without possibly being returned.

The South Korean police reportedly continue to search for further victims and more accomplices. Additionally, authorities are investigating Wacon’s parent company, SAK-3, for possible fraud. SAK-3’s Chairman, Kim Dae-chun, and six shareholders, including Byun, are suspected of orchestrating a similar scam to Wacon’s crypto Ponzi.

Per the investigation, the company lured investors with high-return promises but has not paid customers since February 2023. SAK-3’s damage is estimated at 1 trillion won, which accounts for Wacon’s losses and the money collected from other investors.