South Korean authorities have arrested the CEO of a technology company and his accomplice and charged them with fraud. The two men are suspected of running a crypto scheme worth more than 500 billion won, exploiting elderly people with false promises of huge returns. The scam is estimated to have more than 10,000 members and has affected hundreds of victims.

Crypto Ponzi scheme targets elderly

Last month, tech company Wacon CEO 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 being held on “suspicion of fraud and other charges” after a court granted the arrest warrants due to “concerns over the destruction of evidence.”

According to local reports, the company, which has offices across South Korea, is suspected of running a pyramid scheme with an estimated 12,000 members. Wacon allegedly operated “crypto staking products,” including a supposed wallet service called “MainEthernet,” without registering with financial regulators.

Wacon used a multi-level method to recruit investors, offering unlimited referral income for “introducing acquaintances” to the company’s services. The scam primarily targeted older people who were unaware of cryptocurrencies and what Ponzi schemes are.

According to the reports, investors were offered huge 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 40^and day and 7% on the 43^rd day,” but failed to recoup its investments last year.

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

Wakon reportedly switched platforms several times, forcing investors to move their money and recruit new subscribers during the police investigation.

CEO charged with $366 million fraud

Last week, the Fifth Criminal Chamber of the Seoul Central District Public Prosecutors’ Office, headed by Deputy Chief Prosecutor Kim Tae-heon, charged Byun and Yim with “fraud and fraudulent receipt of funds.”

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

As the report explained, “pseudo-receiving is a business that raises money from an unknown number of people with the promise of retaining the capital without a license, registration or notification under the law.” The report also specified that fraud charges could be levied if it is proven that the money was received without possibly being returned.

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

The investigation found that the company lured investors with promises of high returns, but has not paid customers since February 2023. SAK-3’s losses are estimated at 1 trillion won, which includes Wacon’s losses and money raised from other investors.

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