Demonstrating XX Pay and Running Away... Cryptocurrency Scam Hurting Small Business Owners [The Swamp of Bad Coins]

[Report on 316 Victims of Fraudulent Coins] Coin Scams Targeting Self-Employed
22.5% of Scam Victims Are Self-Employed
Coin Scams Amid COVID-19 Fallout
A Glimpse of Asset Bubble, Polarization, and Recession

The above photo is unrelated to the article content. [Image source=Yonhap News]

[Asia Economy Reporters Byungseon Gong, Chaeun Koo] “They even took all the money from the dried seafood shop and the boutique grandmother.”

A, a 60-year-old victim of the cryptocurrency 'G-Pay' scam, sighed as he recalled the ‘bad coin scam’ that happened in 2019 at the Guri Traditional Market in Gyeonggi Province. He was too busy with his livelihood to even think about filing a complaint, let alone recover the lost funds. He questioned, “The cryptocurrency scam I suffered two years ago is still rampant; won’t it become even harder to punish later on?”

Bad coin and cryptocurrency scams are targeting small business owners and self-employed individuals. According to a survey conducted by Asia Economy from the 1st to the 15th of last month on 316 victims of coin scams, 22.5% (71 people) identified their occupation as ‘self-employed.’ The bad coin scams have extended their reach even to self-employed people struggling to make ends meet amid the COVID-19 fallout. Victims found it difficult to leave their stores unattended and, due to tight finances, found it hard to publicize their victimization through civil lawsuits or criminal complaints.

◆ 22.5% of Scam Victims Are Self-Employed = A representative example of cryptocurrency scams targeting self-employed individuals is the ‘G-Pay scam’ that occurred two years ago at the Guri Traditional Market. The scammers told self-employed people that if they kept G-Pay, which they received as payment, in their wallets, the issuing group of G-Pay would distribute 49% of the profits every three months. They claimed that consumers using G-Pay would get 80% payback on their payment amounts, so all consumers would use G-Pay as a payment method. A said, “At that time, it really seemed like all currencies would be replaced by G-Pay,” and “Since dividends were coming in, I thought it was a ‘no-lose business.’” Some stores even acted as ‘recruiters,’ demonstrating payments made with G-Pay while serving meals. The method was simple: press the application (app) and scan the barcode, and the money would immediately be deducted via G-Pay.

The number of merchants accepting payment in G-Pay increased, but suddenly withdrawals were blocked. B, a 55-year-old scam victim running a women’s clothing wholesale and retail store, showed transaction records where payments were received in G-Pay instead of cash, totaling about 30 million KRW. B said, “Some people lost as much as 100 million KRW, while many others lost small amounts like 200,000 KRW.” Another victim, C (40 years old), said, “From a self-employed person’s perspective, since income is not sufficient, it’s easy to be lured by the illusion of significant profit realization.”

◆ Reluctant to File Complaints Due to Difficulty Abandoning Livelihoods = Scams targeting self-employed individuals like G-Pay have become more rampant since COVID-19. D, a 48-year-old victim of the V Global scam who responded to an in-depth interview conducted from June 1 to 15 this year, said, “The tenant next door persuaded me, saying ‘Everyone is struggling due to COVID-19, but we discovered a blue ocean in the asset bubble era,’ so I had no choice but to be deceived.” B, a Tier One scam victim who said they run a business, stated, “It was difficult to actively respond to the damage because it was uncertain whether the money could be recovered.”

Among the 71 self-employed cryptocurrency scam victims who responded to the survey, 77.5% (55 people) said their assets decreased due to COVID-19. Only 9.8% (7 people) said their assets increased, and 12.7% (9 people) said there was no change. Additionally, 58% (41 people) answered that they ‘did not know’ that cryptocurrencies are not defined as financial assets and therefore are not protected under the Capital Markets Act and financial consumer protection provisions. Thirty respondents (42%) said they ‘knew’ this.

Vacant stores have been steadily increasing in major commercial districts due to the prolonged COVID-19 pandemic. Myeongdong, Seoul's representative commercial area, is in a serious condition with 4 out of 10 stores empty. According to the "2021 Q1 Commercial Real Estate Lease Trend Survey" released by the Korea Real Estate Board, the vacancy rate of medium to large stores in Myeongdong was recorded at 38.4%. Rental inquiries, temporary closure, and business termination notices are posted on Myeongdong shops.
Photo by Moon Honam munonam@

Experts diagnose that bad coin and cryptocurrency scams are preying on vulnerable groups made worse by COVID-19. Kim Bong-shin, Senior Deputy Director at Realmeter, who advised on the survey, pointed out, “The fact that a significant number of scam victims are vulnerable groups affected by the COVID-19 pandemic shows a dark side of our society.” An Il-won, CEO of Research View, said, “Bad coin scams targeting self-employed people may be a new type of scam occurring among vulnerable groups amid our society’s polarization and the COVID-19 crisis.” Jung Yoo-shin, Dean of the Graduate School of Technology Management at Sogang University, said, “Since the convertibility of virtual assets (currencies) into currency is still insufficient, using terms like ‘exchange’ or calling them ‘currency’ may cause misinformation leading to scam damage,” adding, “Legal and institutional improvements are needed, along with correcting the terminology.”

Meanwhile, this survey was conducted by Asia Economy from the 1st to the 15th of last month on 316 victims from a total of 12 cryptocurrency scam victim communities, including Jubilee Ace, V Global, and Bit Sonic (assuming random sampling from an infinite population, the sampling error is ±5.5 percentage points at a 95% confidence level). The appropriateness of the survey questions was advised by Realmeter, a professional public opinion research organization.