South Korean Crypto Exchange Accused of $214m MLM Fraud Raided by Police, Gangnam Style

South Korean Authorities are known for not pulling any punches and this time it has decided to crack down hard on a domestic crypto exchange, allegedly trying to pull off a scam, robbing investors of nearly $214 million.

Oppan Gangnam Style

South Korea has a strict policy regulating multi-level-marketing projects so with a fresh court order in the back pocket, the Seoul police conducted a search at 22 different properties connected to the crypto firm in question. The search took place earlier this week and the list also included the company headquarter, located smack in the middle of the Gangnam financial district.

When the news broke, it didn’t take social media users long to figure out who the target was, even though local media initially refused to disclose the identity of the company. It was later confirmed that the crypto exchange in question is V Global.

Defrauding Over 40,000 Members

With $214 million in now frozen assets, the company CEO is believed to have been selling cryptocurrency using multi-level-marketing methods. The CEO, identified only as “Lee” is together with his accomplices being accused of defrauding over 40,000 of its members from August 2020.

According to the South Korean authorities, the operation posed as a parent company of known domestic crypto exchanges like Upbit, with the premise of guaranteeing high-yield incomes for those who invest in their fake trading platform. The way the scheme has been conducted is textbook procedure when it comes to pulling off this type of Multi-Level-Marketing (MLM) frauds.

Under Investigation

As curiosity struck, many attempted to visit the V Global website to see what was going on, only to be met with a technical error message. While the mobile version pointed to an error in the transaction system and it being under investigation, the desktop version communicated it could take 4 hours to fix the error.

Registered With the Fair Trade Commission

In order to prevent scams like this from happening, companies who use such techniques to promote products, must under the law, abide by the Act of Door-to-Door Sales and should be registered with the Fair Trade Commission.

Warning Issued Only 2 Weeks Prior

The raids come just 2 weeks after the Chairman of South Korea’s top financial regulator, the Financial Services Commission (FSC), Eun Seong-soo announced that more than 200 crypto exchanges in the country faced the risk of being shut down in September if they failed to follow relevant regulations.