Cryptocurrencies transformed the way we glance at transactions, but against the grain, they have also encouraged cybercriminals to lead some massive frauds over the past few years. While the cleverest minds have developed some beyond-belief organizations upheld by the might of blockchain and cryptocurrencies, wicked minds have also pounced on the furor, defrauding innocent investors in complex scams.
Do you know about the Shinil Group scam that took place last month, in which investors were tricked into investing in their cryptocurrency?
The Shinil Group Scam
The most recent attack was reported by JoongAng Daily on July 31st. The South Korean government is certain of the fact that the event is likely a crypto investment scam and are at this time investigating the same. It was discovered that the scam was set in motion by a Shinil Group from Seoul.
Earlier in July, Shinil Group advertised that it had located a shielded cruiser that belonged to Russia, the ‘Dmitri Donskoi.’ This cruiser had sunk 113 years ago (as per a Reuters report). Shinil claimed that the ship was carrying gold valued at 150 trillion won ($131 billion USD).
Shinil created its own cryptocurrency and to attract investors, it designed its strategy around this sunken ship’s gold. Shinil Group ostensibly promised that it would reimburse its investors with the gold from the ship. Since its launch, the company apparently lured 60 billion won, or $53.7 billion USD, as an investment from approximately 100,000 investors.
No Gold Found Anywhere
The district police of Seoul put a travel ban on the traveling of the CEO of Shinil Group, Choi Yong-Seok, and are going to interrogate him and the other parties involved. However, Yong has already admitted that Shinil Group did not have any clear indication about any gold or anything valuable existing on that ship.
According to JoongAng Daily, the scam also involves the head of a Singapore-based partner of the Shinil Group, Yu Ji-Beom. Unusually, the Korea Institute of Ocean Science and Technology, along with the Dong Ah Construction Industrial company, have both denied this bogus claim of the shipwreck supposedly located by the Shinil Group.
Yu presumably set up a crypto exchange, named Donskoi International Exchange, and began spreading posts about the sunken ship everywhere on social media to trap investors. If his acquaintances are to be believed, he was involved in several real estate fraud scams in the past. He’s currently residing in Vietnam, in what some claim is due to the fear of being investigated for these previous scams.
The government is also investigating whether the accused from the Shinil Group tried to make revenue from the ups and downs in the share prices of a South Korean manufacturing firm Jeil Industries. The shares barbed by 30% on July 17th when the former head of the Shinil Group, Ryu Sang-mi, turned out as the 2nd biggest stakeholder of Jeil Steel. Then the prices fell the next day, and Jeil appealed that it was not related to the Shinil Group’s ship project.
Korea Ready with Countermeasures for Handling Cryptocurrency Frauds
Despite the fact that this is not the first time Korean cryptocurrency admirers have fallen prey to bad players who promise beyond-belief returns for investments in cryptocurrency, it is worth noting that such frauds are on the decline.
Although the Korean controllers are working day and night trying to clean the local cryptocurrency space, it is tragic that potential investors find it hard to differentiate between genuine and deceitful crypto-centric investment schemes.
In July, BTC Manager claimed that many cryptocurrency-based security companies in South Korea have taken the responsibility personally to research and find credible and genuine ICO organizations for investors.
This was the specific case of the Shinil Group, although I am still wondering why scams happen in the cryptocurrency world, what are the reasons, and how can investors avoid falling into such traps? Are you also wondering about the same?
Reasons Behind Cryptocurrency Scams
As the saying goes, “The eyes see what they want to see.” Yes, we do tend to see what we want to but ignore and avoid the cheats that are standing right in front of us. One of the reasons behind cryptocurrency scams could be that we see and maybe choose to ignore. Greed is a basic reason behind such scams, and the scammers take complete advantage of this, trapping greedy investors into their dubious crypto offerings.
Below are some of the most common reasons behind cryptocurrency scams.
- ICO (Initial Coin Offerings): There are many ICOs that are genuine but even still, a lot of these do not have real business plans or blockchain application development technology.
- Unrestricted brokers and exchanges: There are many unregulated online exchange and brokerage businesses presenting cryptocurrency exchange and trading. The bad ones will charge too high, take a commission, and make it too difficult for you to withdraw your money.
- Bitcoin exchange systems: The promoters of such exchanges promise traders a way to get past the market by merchandising prices across the exchanges. These often have a costly withdrawal process and heavy fees.
How to Avoid Such Scams?
Cryptocurrency is dicey and highly hypothetical; hence there’s no surefire way to a low-risk investment. But you can lessen the risks by applying some fundamental rules, such as:
- While investing, know that you may lose everything, so only invest an amount that you can afford to lose.
- Before investing in cryptocurrencies, make sure that you thoroughly research the crypto token/project you are considering, including its opportunities and legality.
Featured image: DepositPhotos /© zephyr18