Seventy, Including Insurance Planners, Referred for Participating in Multi-Level Financial Fraud

Suspected Involvement in Lending Company Ponzi Scheme

Seventy individuals, including insurance planners, have been referred to the prosecution on charges of participating in a Ponzi scheme (multi-level financial fraud) orchestrated by a private lending company.

The Seoul Gangnam Police Station announced on the 7th that on October 31, it had referred 58 people, including insurance planners, to the prosecution without detention on charges of unauthorized fund-raising, and an additional 12 people on charges of both unauthorized fund-raising and fraud.

Seoul Gangnam Police Station. Photo by Yonhap News Agency

Some of the insurance planners referred to the prosecution were found to be affiliated with a financial services company that is a subsidiary of a major life insurance firm. While more than 100 suspects were initially under investigation, the remaining individuals were not referred due to insufficient evidence.

They are accused of enticing customers to invest in short-term bond investment products and loan operation products of PS Financial, a private lending company, by promising high returns, and taking up to 3% of the customers' investments as commissions. The organization was structured as a pyramid, with upper-level managers (branch managers) and lower-level salespeople (planners).

When PS Financial ran out of funds, the suspects designed and sold ultra-high-interest products to raise money for repayments. Later, they misappropriated insurance solicitation commission income from a corporate insurance agency (GA) to cover unauthorized fund-raising repayments. However, the bonds and other products they sold did not actually exist, as companies registered for private lending are not permitted to sell such securities.

Previously, in March, the Financial Supervisory Service uncovered that 97 insurance planners affiliated with the company had committed unauthorized fund-raising activities totaling approximately 140 billion won from insurance policyholders, including young adults new to the workforce. At that time, the Financial Supervisory Service stated that they had collected 140.6 billion won from 765 insurance policyholders through unauthorized fund-raising, and 34.2 billion won had not been repaid.