From Coins and Real Estate to Fruit Auctions... Investment Scams Booming with "Big Money" Claims

Economic Crimes Such as Fraud and Embezzlement Reach 400,000 Cases in 2020
60-Year-Old Arrested for Fruit Auction Investment Fraud
Police: "Recent Cases Characterized by Ponzi Schemes"
Expansion Like 'Octopus Legs' Through Acquaintances of Acquaintances

[Asia Economy Reporters Jang Sehee and Hwang Seoyul] 'Investment fraud' exploiting unstable economic conditions such as high inflation, high interest rates, and high exchange rates is occurring everywhere. Fraudsters lure investors by promising that they can make a large amount of money with just one opportunity, but it has been found that most of the victims are people who are economically or investment-wise incapable.

According to the 'Major Economic Crime Occurrence Status' by the National Police Agency on the 20th, the total number of cases including fraud and embezzlement reached 434,698 in 2020, surpassing 400,000 for the first time. Before COVID-19, the number was maintained at around 300,000. This year as well, fraud schemes continue with only changes in the perpetrators and content, such as real estate, coins, and fruit auction businesses.

From Real Estate, Coins to Fruit Auctions... Increasing Ponzi Scheme Methods

This month in Busan, about 10 people including a man in his 60s, Mr. A, from an investment company are under police investigation for fraud charges under the Act on the Aggravated Punishment of Specific Economic Crimes for a scam involving multi-family housing and apartment public auction investments amounting to 100 billion won. Last month, the Gwanak Police Station in Seoul arrested and sent a woman in her 60s to prosecution for fruit auction business investment fraud. In May this year, a group that embezzled 42.9 billion won by manipulating coin prices was handed over to the prosecution.

The police unanimously stated that recent cases are characterized by the use of Ponzi schemes. Police officers in frontline stations in Gangnam, Seoul, said, "At first, they pay part of the interest to reassure victims and deceive them into thinking they have the ability to pay." Another officer added, "Sometimes the interest level was set based on the victims' characteristics," and "In cases where victims were self-employed, they paid 100% of the interest anticipating urgent need for money." This is interpreted as a concern that if payments are not made well at first, investors might become suspicious and report the fraud.

The fraud was also expanded like an octopus through acquaintances' sales. The recent real estate investment fraud in Busan and the fruit auction business in Gwanak, Seoul, both started with 2-3 acquaintances. Afterwards, these acquaintances gathered relatives and friends, which further increased the scale of the fraud damage.

Frequent Fraud Crimes During Economic Instability... "Investment Within Legal Framework and Active Police Investigation Are Crucial"

Experts advise thoroughly verifying legality in advance as fraud crimes frequently occur during economic instability. Professor Lee Woonghyuk of Konkuk University’s Department of Police Science said, "Fraud crimes often occur during times of economic instability," emphasizing, "It is important to investigate and invest within the most credible legal framework and to avoid investing even if there is the slightest suspicion."

Researcher Seung Jaehyun of the Korea Institute of Criminal Justice Policy stated, "Fraud is occurring by changing only the means and forms, exploiting material-related affluence," and argued, "We must abandon a lenient view on economic crimes and actively investigate and severely punish them as serious crimes." He added, "The types of fraud crimes under the Corruption Property Act should be expanded, and systems such as confiscating perpetrators' assets and returning them to victims should be further supplemented."

Meanwhile, since his inauguration, National Police Chief Yoon Heegeun has declared the 'Seven Major Frauds Against Ordinary People' as his first directive. The police promised to eradicate organized fraud including investment fraud, virtual asset-related pyramid schemes, voice phishing, and jeonse (lease) fraud.