"You Should Be Wary of Investment Solicitations from Acquaintances"—Financial Supervisory Service Issues Consumer Alert Over 'Ponzi Schemes'

[Financial News] Crimes involving the solicitation of funds with promises of principal protection and high returns have surged recently. The Financial Supervisory Service urged financial consumers to exercise particular caution as investment solicitations disguised as multilevel schemes or cooperatives continue to increase.
According to the Financial Supervisory Service on the 21st, 22 complaints related to multilevel-style illegal fund-raising and 10 complaints related to illegal fund-raising through purported cooperatives were filed this year. The Financial Supervisory Service took measures such as referring cases for investigation after counseling victims, but recovering their losses remains practically difficult.
A financial-industry official said, "Even if an investigation into a multilevel fraud makes progress, it is difficult to recover the losses," adding, "Even when an acquaintance or family member recommends an investment, people should be suspicious once more if it promises returns beyond common sense."
Multilevel-style illegal fund-raising is a Ponzi scheme in which returns are paid to existing investors with money from new investors. If the inflow of new investment funds stops—that is, if no one else is deceived—the perpetrators disappear, causing losses. In this process, early investors may face the risk of becoming perpetrators as well as victims. Victims who draw family members or acquaintances into the scheme can end up becoming perpetrators.
Cases have also been identified in which groups posed as cooperatives, maintained branches and recruiters nationwide, and induced people to join by promising high returns and principal protection. They solicited capital contributions by touting monthly salaries or dividends and explained that the principal would be guaranteed upon withdrawal from the cooperative, but in reality, the risk of losing the principal was high. In particular, many investment solicitations came through family members or acquaintances, while others targeted older people under the pretext of creating jobs for seniors.
The Financial Supervisory Service stressed that investments promising both high returns and principal protection always carry substantial risks. It stated that consumers should exercise particular caution when investments are solicited at business presentations or similar events with promises of compensation for recruiting lower-level members. It also urged consumers to remember that an investment recommended by family members or acquaintances may still be an illegal fund-raising scheme or fraud. If illegal activity is suspected, they should immediately report it to the police or the Financial Supervisory Service and seek advice. The Financial Supervisory Service emphasized that prompt reports and tip-offs can prevent further losses and provide a path to seeking redress.
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