Over the past year I’ve noticed South Korea placing on an increasing number of MLM underbelly scams.
I suspect due to language barriers, the people pushing these scams and much of South Korea’s MLM underbelly community remains a mystery outside of Korea itself.
A large number of South Korean MLM activity has coincided with an increase in cryptocurrency fraud (Ponzi points or altcoin pump and dump scams), which hasn’t escaped the attention of local authorities.
On September 7th ten South Korean government departments held a meeting to discuss the matter.
Among the government agencies looking to tackle the rise of MLM cryptocurrency fraud in South Korea are the Ministry of Justice, Ministry of Strategy and Finance, Financial Services Commission (FSC) and local police.
As per Korean law,
it is illegal to create new digital currencies because the value of digital currencies are not guaranteed by the government or financial institutions.
As I’m reading it, this would make any MLM cryptocurrency opportunity illegal in South Korea.
While I’m not aware of any companies that operate out of Korea, promotion of the various MLM cryptocurrency scams going around is rife.
One example is OneLife, the marketing arm of the OneCoin Ponzi scheme.
Pegging exactly how much has been stolen through OneCoin is problematic due to the scale of fraud and banking channels across numerous shell companies and countries.
I’d personally guess they’ve taken in more than a billion but beyond that I’d be uncertain.
Regardless, at the time of publication Alexa estimate South Korea is the largest source of traffic to the OneLife website.
That means South Korea is currently the top source of promotion for what is currently the largest MLM cryptocurrency scam operating today.
South Korean authorities are hoping to crack down on MLM cryptocurrency fraud between September to December, in what they’ve deemed an “intensive illegal pyramid scam crackdown period”.
(The government) plans to grasp the trend of illegal digital currency pyramid scams through related organizations, including the Mutual Aid Cooperative & Consumer and Korea Special Sales Financial Cooperative Association, and then form a joint crackdown team with related agencies such as the Police, FSC and Ministry of Justice.
To this end, the government will run “intensive reporting period” on websites of each mutual aid association so that consumers can report their damages.
Information gleaned from victims of MLM cryptocurrency fraud such as OneCoin and OneLife will be used to
charge those who create digital currencies in the form of stock issuance with violation of the capital market law, punish them and share the related data with foreign law enforcement authorities, including Interpol.
The South Korean Act on Reporting and Use of Certain Financial Transaction Information links MLM cryptocurrency fraud with tax evasion and money laundering, giving authorities an avenue with which to pursue local scammers through.
The government has required financial institutions to immediately report possible digital currency scams and take all the measure possible according to the current law this month, including identification and authorizations of account holders.
It also plans to review the law related to the multilevel marketing and regulate digital currency transactions in the long term and hold a joint task force meeting with relevant ministries to discuss digital currency countermeasures every quarter.
Neighboring China announced a similar four-month pyramid scheme crackdown on pyramid schemes last month.
Part of that crackdown saw thirty-five Chinese OneCoin affiliates arrested, fined and sentenced to either probation or prison time.
Whether Korean authorities target local OneCoin affiliates is as of yet unclear. OneCoin/OneLife definitely isn’t the only MLM cryptocurrency scam out there but currently it’s easily the biggest.
As with China, looking forward we’re unlikely to hear anything further until arrests have been made. Stay tuned…