Unicorns, Gems, and Other Virtual Characters Yield High Profits... Beware of Multi-Level 'Ponzi Scams'

[Asia Economy Reporter Jo Gang-wook] #. Jo, a resident of Daegu, joined a pseudo-financial platform investment company called Hol** through an acquaintance's introduction and invested 2 million won. At the time of membership registration, a promotion was underway offering a discount on the registration fee and providing the trading means (originally paid) necessary for paying transaction fees free of charge. However, the company demanded additional purchases to sell the characters they owned, and the transactions did not proceed as originally promised. Furthermore, the company unilaterally conducted transactions by arbitrarily splitting characters or confiscating the trading means provided through the promotion, resulting in the investor being unable to recover the invested funds.

Recently, under the low-interest rate trend, pseudo-financial platform scams involving trading virtual characters targeting investors seeking high returns have become rampant, causing serious damage, prompting financial authorities to issue a warning. It is pointed out that these are typical 'Ponzi schemes' with no source of profit, preserving existing members' earnings with new members' investments.

The Financial Supervisory Service (FSS) warned on the 23rd that 'pseudo-financial platform investment scams' that lure people into buying and selling characters online for high returns are widespread and urged caution.

According to the FSS, these companies create characters such as animals, buildings, unicorns, and fish, and advertise themselves as peer-to-peer (P2P) or e-commerce platforms that utilize innovative investment techniques.

These companies advertised that holding a character for a certain period would automatically increase its price, and members' profits would come from the trading margin by selling at a price higher than the purchase price. They claimed that the character's price would inevitably continue to rise as transactions repeated, and once the character price reached a certain amount, one character would be split into multiple units.

They also promoted multi-level marketing income by paying a certain percentage of the referred person's trading profits as incentives when directly introducing new members. Additionally, they showed typical multi-level business behaviors by controlling negative opinions and complaints from members through group KakaoTalk rooms and managing to prevent member attrition.

The FSS pointed out that smooth transactions require a continuous influx of new buyers, and if new buyers do not enter, the last buyer suffers losses, which is a typical 'Ponzi scheme' or 'hot potato' form. Ponzi schemes refer to multi-level financial frauds that pay dividends to existing investors with money from new investors, originating from the fraud committed by Charles Ponzi in the 1920s.

Moreover, since the transaction matching method is not disclosed, members find it difficult to know the abnormal transaction details accurately. Transactions can only be made and verified by accessing the site, so if the site is suddenly closed, recovering the investment is impossible, the FSS warned.

The FSS advised, "If a return much higher than the market interest rate is guaranteed, you should first suspect fraud," and added, "You should also keep in mind that following recommendations from acquaintances claiming 'exclusive information' can make you a victim of multi-level investment fraud."