Vignesh Karunanidhi
South Korean authorities have dismantled a cryptocurrency fraud operation that allegedly swindled over 15,000 victims out of 300 billion won ($213 million).
This marks the largest crypto investment scam case in the country’s history, according to the Gyeonggi Southern Provincial Police Agency.
Prominent YouTuber orchestrated the crypto scheme
The fraud scheme was orchestrated by a prominent YouTuber with 620,000 subscribers. The YouTuber established an elaborate network of companies, including six quasi-investment consulting firms and ten sales corporations. The organization was divided into 15 specialized units handling various aspects of the operation, from coin issuance and price manipulation to database management and money laundering.
The operation began in December 2021 when the ringleader, identified only as “Mr. A,” shifted from stock trading recommendations to cryptocurrency sales after facing group refund requests from previous failed stock trades in 2020.
The group employed aggressive marketing strategies, making unsolicited calls to over 9 million mobile phone numbers acquired through YouTube lectures and advertisements. They lured investors with promises of “20 times the principal” returns and used persuasive phrases like “A chance to change your destiny” and “Sell your apartment and get a loan to buy coins.”
The criminal enterprise created and sold 28 different crypto, with six tokens self-issued and listed on overseas exchanges through brokers. These tokens were subject to price manipulation through artificial trading activity before being sold to unsuspecting investors.
The remaining 22 cryptocurrencies, while not self-issued, were determined to have minimal actual value due to low trading volumes and limited information availability in South Korea.
Targeting vulnerable crypto investors
The organization specifically targeted previous victims of stock and cryptocurrency losses, promising to recover their losses through “coins with good profit prospects.”
In another tactic, members impersonated Financial Supervisory Service officials using fake business cards and phones to gain victims’ trust and personal information, which was then used to secure credit loans.
Most victims were middle-aged or elderly individuals, with some investing up to 1.2 billion won ($786,000) in the scheme. In extreme cases, victims sold their primary residences to participate in the fraudulent investment scheme.
The police investigation began following a case filed at a local police station in February 2023. Authorities analyzed 1,444 accounts related to virtual asset sales to trace the flow of funds. The ringleader, who had fled to Australia via Hong Kong and Singapore, was eventually arrested, and authorities confiscated 22 Bitcoin in his possession.
The investigation led to the arrest of 215 individuals
Law enforcement has applied for pre-indictment confiscation and preservation of recovery for 47.8 billion won ($31.3 million) identified through account tracking. The investigation led to the arrest of 215 individuals, with 12 key members, including the ringleader, being detained.
The suspects face charges under the Aggravated Punishment Act for Specific Economic Crimes and additional charges related to organizing, joining, or participating in a criminal organization.
The case represents a major victory for South Korean authorities in their ongoing efforts to combat cryptocurrency-related fraud.
“Investment leading fraud crimes are becoming more organized and intelligent, producing many victims,” stated a police official. He warned the public that promises of high returns through non-face-to-face investment recommendations often signal fraudulent schemes.
