They Promised to Turn 100 Million into 260 Million Won... Retirement Funds All Drained [After the Ponzi Scam]

①From Forced Sales of Health Supplements to Mobile Payments
Investigations Become Difficult as Tactics Grow More Sophisticated

Asia Economy looked into the increasingly sophisticated illegal multi-level marketing schemes through interviews with four victims of Ponzi scams. Most of the victims were ordinary citizens who were seeking investment opportunities to prepare for retirement or overcome financial hardships. They said, "We invested thinking it would solve our economic difficulties."

Victims of Ado International have been setting up tents and holding rallies near the Seoul Central District Court in Seocho-gu, Seoul, for seven months since September last year.
[Photo by Lee Ji-eun]

Lost Retirement Funds and Took Refuge in a Temple... Undergoing Personal Rehabilitation in His 60s

A (66), who was spending his retirement taking care of his granddaughter at his daughter's house, saw his life plunge into despair starting last year. In May of last year, A was introduced by an acquaintance to a quasi-deposit-taking company suspected of illegal multi-level marketing fraud called 'Ado International' and invested 72 million KRW there. The acquaintance stirred A's anxious mind, who had been wandering between his children's homes without a fixed residence, by saying, "How long can you keep asking your daughter for help?"

The company is accused of embezzling investment funds by claiming they would resell returned goods from Korea to Southeast Asia and return profits. They recruited investors by promising to pay 2.5% daily interest on the investment and paid commissions to those who brought in new investors, employing a typical Ponzi scheme. The amount of damage reached around 400 billion KRW. Since September last year, prosecutors have indicted a total of 20 people, including CEO Lee of Ado International and heads of affiliated companies.

A's investment seemed to grow rapidly, but the joy lasted less than a month. The company stopped paying dividends in June last year, citing a computer hacking incident, and disappeared. After his daughter found out about the investment and they had an argument, A had to leave the house. After wandering across the country, A barely found a place to stay at a small hermitage in Wonju, Gangwon Province. He is currently working at a nursing care facility while undergoing personal rehabilitation, despite having worn-out knee cartilage.

"Afraid My Children Would Find Out"... Wearing a Mask at Protests

B (67) had been waiting all her life for retirement. After losing her husband, she had to raise her children alone while running a karaoke bar and a cafe?a life full of hardship. She planned to live her remaining years frugally with the 52 million KRW she had saved. However, after investing all her retirement funds in the agricultural cooperative corporation H, B's dreams were shattered.

H was a platform company that claimed to connect producers and consumers of agricultural, livestock, and fishery products. It attracted investors by promising to increase their capital to 2.6 times in digital assets. The company also claimed that if investors checked in daily on their self-developed pay app, they would receive 0.2% daily returns on the digital assets.

In other words, investing 100 million KRW would generate 260 million KRW in digital assets, and daily check-ins would yield 520,000 KRW in profits per day.

However, after CEO Lee was arrested in December last year for violating the Act on Door-to-Door Sales, etc., withdrawals of investment funds were halted. According to the financial statements at the end of 2021, H recorded sales of 10.7 billion KRW and a net loss of 30 billion KRW, with total liabilities reaching 79.1 billion KRW, effectively plunging the company into insolvency. Victims filed a complaint against Lee and the corporation for fraud with the police in January.

Ultimately, B had to return to work to make a living. She started working six hours daily as a nursing care worker, living on 1.4 million KRW per month. She lied to her married daughter, telling her she was enjoying a happy retirement. Afraid her daughter would suspect, B wore a mask and wrapped a scarf around her face to conceal her identity when attending victim relief rallies. B tearfully said, "My heart sinks every time my daughter calls."

Image unrelated to the incident. [Image source=Yonhap News]

Lost Settlement Funds and Divorced... Hospitalized in a Closed Psychiatric Ward Due to Hwabyeong

For C, a North Korean defector in his 60s, life in Korea was a series of harsh trials. Less than three years after settling in Korea by crossing the Tumen River in 2016, C invested about 10 million KRW in a quasi-deposit-taking company dealing in health functional foods. Of this, he recovered only 900,000 KRW.

Victims claim that the company collected about 5.2 billion KRW from 2014 to 2021 by promising to return five times the profits upon shopping mall settlements. However, the Seoul Southern District Prosecutors' Office dismissed the case last year, stating there was no confirmed evidence that the company definitively promised five times the sales returns. The victims have filed a re-investigation request with the Seoul High Prosecutors' Office.

C lost all his savings, including government settlement support funds and money saved to bring his daughter from China. His husband strongly pressured him, leading to family breakdown. He suffered from Hwabyeong, a Korean culture-bound syndrome, causing sleepless nights. Eventually, C's post-traumatic stress disorder from his defection worsened, resulting in a 40-day hospitalization in a closed psychiatric ward.

Multi-level pyramid structure. Image unrelated to the incident. [Image source=Yonhap News]

Manufacturing Company Owner Turned Private Detective... Three Businesses Closed

D, who ran a manufacturing business, transferred 7 bitcoins to ICC (Intercoin Capital), a cryptocurrency investment company, in May 2019 at a friend's recommendation. At that time, the price of one bitcoin was about $5,800, meaning he invested approximately 54 million KRW.

The company attracted investors by promising up to 15% monthly returns if they purchased cryptocurrency from July 2018 to September 2019 and transferred it to ICC's account. They also promised to distribute stocks of the same amount separately if the company was listed on NASDAQ. However, in September 2019, the group suddenly closed their accounts and disappeared, just four months after D started investing.

After the incident, D's main occupation changed from manufacturing company owner to unpaid private detective. In 2021, as a victim representative, he filed a complaint against the recruiters at the Seoul Metropolitan Police Agency and began searching for evidence. Upon hearing that the perpetrators had committed fraud in countries like Singapore and China, he spent 2 million KRW of his own money to translate Chinese recordings. Despite extreme stress and wanting to give up, he received over 100 contacts daily from victims nationwide seeking help.

After a long battle, ICC's CEO Jo and 22 executives were sent to prosecutors in December last year on charges of fraud and violations of the Act on Regulation of Conducting Fund-Raising Business without Permission. However, over five years, D had to close three of his businesses.

According to statistics from the Supreme Prosecutors' Office, the number of quasi-deposit-taking crimes reported to investigative agencies last year totaled 2,735 cases, maintaining over 2,000 cases annually for four years since 2019, except for 1,643 cases in 2021.

Editor's NoteThey attract investors by guaranteeing unrealistic returns. Later, they pay profits to earlier investors using the money from newer investors. This simple structure is widely known to us as illegal multi-level marketing or Ponzi schemes. Over time, the forms have evolved from forced sales of health supplements to overseas mining investments, and now to blockchain and mobile payment formats. However, with increasingly sophisticated criminal methods, over 2,000 cases of damage occur every year. We will explore the victims' suffering, the sophistication of fraud methods, reasons for investigative difficulties, and crime prevention methods in a three-part series.