13 Aug
13Aug

South Korean authorities have made significant strides in tackling a major cryptocurrency Ponzi scheme, resulting in the arrest and indictment of Byun Young-oh, CEO of tech firm Wacon, and his accomplice, Vice Chairman Yim Mo-Soo. The scheme, estimated to involve over 500 billion won (approximately $366 million), has defrauded thousands, with a significant focus on elderly victims.

Details of the Scheme

Last month, Byun and Yim were arrested and indicted on charges of fraud and other related offenses. The court issued arrest warrants due to concerns about evidence tampering. Wacon, which operates across South Korea, is alleged to have orchestrated a Ponzi scheme with around 12,000 members. The company purportedly offered "crypto staking products" and an unregistered wallet service named “MainEthernet,” misleading investors with promises of extraordinary returns.

The scheme targeted elderly individuals who were often unfamiliar with cryptocurrency and Ponzi schemes. Investors were enticed with claims of massive returns, including “100% interest” and profits from a “casino-AI platform.” Wacon promised returns of “30% on the 40th day and 7% on the 43rd day,” but failed to deliver on these promises, resulting in significant losses.

Scale and Impact

In June 2023, Wacon's inability to honor payments led to substantial financial losses for its investors. Reports indicate that investors collectively lost hundreds of billions of won, prompting a thorough investigation by South Korean authorities.

The investigation revealed that Wacon had switched to new platforms multiple times, compelling investors to transfer their funds and recruit new members. This constant shifting compounded the fraud's impact and extended the scheme's duration.

Legal Proceedings and Charges

The Seoul Central District Prosecutors’ Office, under the direction of Deputy Chief Prosecutor Kim Tae-heon, has charged Byun and Yim with fraud and fraudulent receipt of funds. The indictment alleges that Wacon defrauded approximately 500 investors of 54 billion won (about $39 million) and engaged in the fraudulent receipt of roughly 500 billion won (around $365 million).

According to the investigation, Wacon’s operations involved raising funds from an unspecified number of people with promises of principal preservation without proper licensing or registration. Fraud charges are being pursued based on evidence that the money collected was never intended to be returned.

Broader Investigation

Authorities are also probing Wacon’s parent company, SAK-3, for potential fraud. SAK-3’s Chairman, Kim Dae-chun, and six shareholders, including Byun, are suspected of orchestrating a similar fraudulent scheme. The damage attributed to SAK-3 is estimated at 1 trillion won, encompassing both Wacon’s losses and additional investor funds.

The South Korean police are continuing their search for more victims and accomplices involved in this extensive fraud. The investigation highlights the increasing regulatory efforts to combat large-scale cryptocurrency scams and protect vulnerable investors.

Conclusion

The crackdown on Wacon and its associated entities represents a significant step in addressing cryptocurrency fraud in South Korea. The scale of the scam and the focus on elderly victims underscore the urgent need for vigilance and regulatory oversight in the cryptocurrency market. As legal proceedings continue, the case serves as a stark reminder of the risks associated with unregulated investment schemes and the importance of safeguarding investor interests.

August 2024, Cryptoniteuae

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