CEO Arrested in $365 Million Crypto Scam

South Korean authorities have charged the CEO of tech firm Wacon and his accomplice with orchestrating a major cryptocurrency fraud. This scheme, valued at over 500 billion won (around $365 million), specifically targeted elderly individuals with false promises of high returns. The scam allegedly involved over 10,000 people and caused significant financial losses for hundreds of victims.

Wacon's CEO, Byun Young-oh, and Vice Chairman, Yim Mo-soo, were arrested for allegedly running a cryptocurrency scam worth billions of won. They were charged with “fraud and other offenses” after the court issued warrants due to concerns about potential evidence destruction. Wacon operated across South Korea and is accused of managing a Ponzi scheme with about 12,000 members. The company offered "crypto staking products" through an unregistered service called "MainEthernet."

Wacon used a multi-level marketing strategy to attract investors, promising unlimited referral bonuses for recruiting new members. The scam targeted mainly elderly people who were unfamiliar with cryptocurrencies and Ponzi schemes.

Investors were promised significant returns, such as "100% interest" and profits through a "casino-AI platform." Wacon also claimed to offer "30% on the 40th day and 7% on the 43rd day," but failed to return investments. In June 2023, investors lost billions of won when the company stopped paying interest and returning the original investment. This led authorities to start investigating Wacon.

During the investigation, Wacon reportedly switched to new platforms several times, forcing investors to transfer funds and recruit new members.

The Seoul Central District Prosecutors’ Office recently indicted Byun and Yim for “fraud and fraudulent receipt of funds.” The investigation claims that the company defrauded about 500 investors of 54 billion won (around $39 million) and was involved in the fraudulent receipt of approximately 500 billion won ($365 million).

The scam involved raising funds with promises of preserving the principal amount without a license or registration. Fraud charges apply if the money was taken without an intention to return it. Authorities are still searching for more victims and accomplices. They are also investigating Wacon’s parent company, SAK-3, for potential fraud. SAK-3’s Chairman, Kim Dae-chun, and six shareholders, including Byun, are suspected of running a similar scam.

SAK-3 allegedly lured investors with high-return promises but has not paid customers since February 2023. The damage is estimated at 1 trillion won, including Wacon’s losses and funds from other investors. This case highlights the significant risks in the cryptocurrency market, especially for those unfamiliar with it. The targeting of elderly investors underscores the need for stricter regulations and increased public awareness to protect potential victims from similar schemes.

The indictment of Byun and Yim is a significant step in addressing financial crimes that exploit people’s lack of knowledge about new technologies. It also serves as a warning to other fraudulent entities in the cryptocurrency space.

The South Korean government’s actions against Wacon and its executives demonstrate a commitment to combating fraudulent activities in the crypto sector. As the investigation continues, authorities aim to uncover the full extent of the scam and bring all responsible parties to justice. This case serves as an important reminder of the need for due diligence and regulatory oversight to protect investors and maintain trust in the digital finance landscape.