“40% monthly returns guaranteed through Nasdaq investments” ... The truth behind a 1-billion-won-plus investment scam [True Crime]

[Financial News] A person in their 30s has been sentenced to prison for allegedly deceiving investors with promises of monthly returns in the 20%-40% range and a guarantee of their principal, and taking more than 1 billion won from them. The defendant raised investment funds by promoting Nasdaq futures and cryptocurrency investments, but continued taking money while promising high returns even though most of the actual investment funds could not be recovered. The court found that, even if some of the funds had been used for trading, the defendant had deceived investors while unable to repay their principal and provide the promised high returns.
According to legal sources on the 16th, Judge Kim Cheon-su of the Seoul Northern District Court’s Criminal Division 8 (single-judge panel) sentenced A, 37, to four years in prison on the 30th of last month for fraud and violating the Act on the Regulation of Conducting Fund-Raising Business without Permission.
A was indicted on suspicion of taking a total of 936,789,368 won from six investors on 26 occasions between March and June 2022 by promoting investments in Nasdaq futures and cryptocurrencies. A was also accused of borrowing money in May of the same year on the pretext of needing to pay a settlement for a younger sibling or repay private-loan debts, then failing to pay it back. The amount lost in the loan fraud totaled 120 million won from four people. The court found that the overall fraud offenses had seven victims and caused losses of at least 1.05 billion won.
A told investors that A was running a Nasdaq futures investment business and was so skilled at stocks as to have placed first in a stock trading competition. A solicited investments by promising returns of at least 40% a month and guaranteeing the principal. According to the ruling, A also sent some investors messages saying that A could pay them monthly returns of 10 million to 15 million won, or that an investment of 400 million won could generate average monthly returns of 70 million to 100 million won.
At the time, however, A was in financial difficulty, having taken out loans from multiple financial institutions and money-lending companies, as well as borrowed money from family members and other individuals. The investigation found that A was using money from new investors to pay the principal and returns owed to existing investors—a practice known as “robbing Peter to pay Paul”—and had spent some of the investment funds on personal living expenses.
A denied intending to commit a crime, claiming that most of the investment funds had actually been used for Nasdaq futures trading. From April to June 2022, A transferred a total of about 620,340,000 won to accounts that A claimed had been used to manage the investment funds. However, only about 86,320,000 won was returned from those accounts.
The court found that the fact that A had actually made investments was not, by itself, enough to disprove the fraud charge. It focused on how A continued to take investment funds while unable to recover most of them, boasting of A’s investment ability and telling victims as if they would receive high returns. Contrary to A’s claim of having adequately explained the investment risks, the court found little in the submitted messages to alert investors to those risks, and said the messages instead encouraged further investment or touted A’s investment ability.
A also encouraged investments in cryptocurrency. According to the ruling, A showed one victim a document stating that a coin would be listed on at least one of four domestic cryptocurrency exchanges by September 30, 2022, and that its listing price would be at least 100 won per coin. The document also said that the 100 million won investment would be guaranteed if the listing price did not exceed 115 won. A also took money from other investors while representing that they could earn high returns through coin investments.
The coin was never listed, however, and the court found that its value could not be verified. The court also noted that when A received the investment funds, A had failed to provide a legitimate basis for believing that the coin investment could generate high returns.
The court also questioned the program A claimed to have used for Nasdaq futures trading. Based on the program’s form and operating method, the ruling found it highly likely to have been an illegal futures-trading program in which no actual futures trades took place. The court also cited A’s failure to tell investors that A was not using a company licensed to conduct financial investment business as grounds for finding A guilty of fraud.
Separately from the investment fraud, A was also indicted for allegedly lying to acquaintances when borrowing money from them. A asked for money by claiming that the younger sibling had gotten into trouble and needed settlement money, or that the younger sibling had borrowed from loan sharks and was paying 5 million won a day in interest. The court found, however, that there was no actual need at the time to pay a settlement over an incident involving the sibling, nor were there any receivables to collect. In other words, A had no intention or ability to repay the victims as promised.
The court found that A had deceived investors by promising to pay back their principal along with returns exceeding it, and had engaged in illegal fundraising by soliciting funds from an unspecified number of people. It said the conduct could constitute illegal fundraising even if the investors were personally acquainted with A or had been introduced through acquaintances, as long as anyone who wished to invest had the opportunity to do so.
In sentencing, however, the court took into account that A had paid some victims and made court deposits in the criminal case. After being indicted, A paid 500,000 won each to victims B and C, 1.5 million won to D, and 5 million won to victim E, who then submitted a statement saying they did not want A punished. A also deposited 2.5 million won with the court on behalf of each of victims F and G, but F stated that they did not intend to receive the deposited money. Considering the circumstances of the compensation efforts and the nature of the offenses, the court sentenced A to four years in prison.
[email protected] Seo Ji-yoon Reporter