TLDR
- South Korean authorities arrested and indicted the CEO of tech firm Wacon and his accomplice for alleged crypto fraud.
- The scheme is estimated to have involved over 500 billion won ($365 million) and affected around 10,000 members.
- The scam targeted elderly people with promises of high returns through crypto staking products.
- Investors were offered benefits like “100% interest” returns and profits from a “casino-AI platform.”
- The company failed to pay investors in June 2023, leading to losses of hundreds of billions of won.
South Korean authorities have taken action against an alleged cryptocurrency scam that primarily targeted elderly victims.
The CEO of tech firm Wacon, Byun Young-oh, and Vice Chairman Yim Mo-Soo were arrested and indicted last month on suspicion of fraud and other charges.
The scheme, which operated across South Korea, is estimated to have involved over 500 billion won (approximately $365 million) and affected around 10,000 members.
Wacon allegedly ran unauthorized crypto staking products, including a wallet service called “MainEthernet,” without proper registration with financial regulators.
Prosecutors claim the company used a multi-level marketing approach to recruit investors, offering unlimited referral revenue for bringing in new participants.
The scam specifically targeted elderly individuals who had limited knowledge of cryptocurrencies and Ponzi schemes.
Investors were enticed with promises of significant returns, including “100% interest” and profits generated through a “casino-AI platform and other services.” The company also claimed it would pay “30% on the 40th day and 7% on the 43rd day” of investments.
However, in June 2023, Wacon failed to pay the promised interest and return original investment amounts, resulting in losses of hundreds of billions of won for investors. This failure prompted South Korean authorities to launch an investigation into the company’s activities.
The Fifth Criminal Division of the Seoul Central District Prosecutors’ Office, led by Deputy Chief Prosecutor Kim Tae-heon, has now 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 ($39 million) and was responsible for the “fraudulent receipt of approximately 500 billion won” ($365 million).
Authorities define “pseudo-receipt” as a business practice that raises funds from an unspecified number of people with promises of preserving the principal, without proper licensing, registration, or notification under the law.
Fraud charges can be applied if it is proven that the money was received without the possibility of being returned.
The investigation is ongoing, with police continuing to search for additional victims and potential accomplices. Authorities are also looking into Wacon’s parent company, SAK-3, for possible involvement in a similar fraud scheme.
SAK-3’s Chairman, Kim Dae-chun, and six shareholders, including Byun, are suspected of orchestrating a scam similar to Wacon’s crypto Ponzi scheme.
SAK-3 allegedly lured investors with high-return promises but has not made payments to customers since February 2023.
The estimated damages from SAK-3’s activities are reported to be around 1 trillion won, which includes Wacon’s losses and money collected from other investors.
