- In a major crypto scandal in South Korea, thousands of victims lost up to US$365 million to a Ponzi scheme operated by Wakon.
- Wakon’s CEO Byun Young-oh and associate Yeom Mo-si were arrested, accused of scamming thousands through an unregistered service.
- Wakon and its parent company SAK-3 are under investigation for fraudulent practices that led to massive financial losses.
Who wouldn’t love 45% returns on their assets? What could go wrong, right?
In the case of a crypto scandal shaking up South Korea, it did go terribly wrong.
At least for the thousands of victims who lost up to US$365 million (AU$550 million) and the now arrested CEO of tech company Wakon. Local news outlet Jeonnam Ilbo reports that the Seoul Central District Prosecutors’ Office arrested CEO Byun Young-oh and key associate Yeom Mo-si, alleging multilevel financial fraud involving hundreds of billions of won in crypto.
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Authorities allege the individuals operated a scam cryptocurrency deposit service fleecing up to 12,000 elderly investors of their money. The unregistered service called “MainEthernet” worked very similarly to a Ponzi scheme.
Members were promised extraordinary interest rates as well as a bonus for recruiting new members. Promises included up to 100% interest in schemes such as ‘30% in 40 days, 7% on the 43rd day’ and so on, through so-called “casino-AI platforms”. Wakon failed to return investors’ money and stopped paying interest in June 2023 when investors lost billions of won.
In a move to ditch investigators, Wakon reportedly switched platforms while investigations by police were ongoing.
Wakon Parent Company Also Under Investigations
Wakon’s parent company, SAK-3 is also under investigations for similar fraudulent activities. Kim Dae-cheon, the jailed chairman of SAK-3, together with six shareholders including Byeon, used the same investment recruitment strategies as Wakon.
This resulted in the non-return of principal and interest to investors beginning in February of 2023. The total estimated financial damage attributed to SAK-3 exceeds 1 trillion won (AU$1.1 billion), encompassing unrecovered funds from Wakon and additional amounts collected from other shareholders.
Related: South Korea Experiences Surge of AI Token Trading, Covering Almost Fifth of Market
Wakon CEO Byun denies any wrongdoing and claims he wasn’t aware of a Ponzi scheme. A spokesperson for the Countermeasures Committee said:
“Wakon was organized from the beginning with the purpose of fraud, sharing roles and dividing introduction fees in a multilevel command system. They should be charged with organizing a criminal group.”
Crypto a Heated Topic in Country Since Do Kwon
Koreans are no strangers to scams and scandals. South Korean national Do Kwon was the co-founder of Terraform Labs, which saw the spectacular 2022 collapse of Terra. Kwon has since served a term in a Montenegrin prison for falsifying travel documents while attempting to leave the country for a safer place.
Related: Hong Kong Announces Plans to Strengthen Digital Asset Regulation, Aligning with Southeast Asian Peers
He is facing extradition to the United States or his home country of South Korea. However, Montenegro’s Supreme Court has delayed the extradition of Kwon to South Korea, allowing time to rule on a legal protection issue. This decision follows an appellate court’s support for his extradition, reported by Vijesti on August 8.
The Terra collapse wiped out US$60 billion (AU$90.5 bn) of investors’ money worldwide, with up to 200,000 victims in South Korea alone.
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