Business & Economy Startups Masterminds of Bitcoin Ponzi scheme ordered to pay multi-million dollar fines

Masterminds of Bitcoin Ponzi scheme ordered to pay multi-million dollar fines

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It comes the same week as another Ponzi scheme was busted in China

 

Bitcoin and judge gavel laying on flag of South Korea. Bitcoin legal situation in South Korea concept. 3D rendering

Two men who reportedly used fake promises of high Bitcoin returns to build a Ponzi scheme were handed down US$15 million and US$8 million fines by a South Korean court this week.

According to Coindesk, the pyramid scheme managed to steal US$20 million from investors. The scheme began in 2015.

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While it is unclear what happened here, cryptocurrency Ponzi schemes typically work by leveraging the idea of mining rigs, fake proprietary networks or trading profits from exchange listings.

The perpetrators then convince investors they have and that the more money stakeholders put down, the higher the number of coins they will hold and thus receive bigger returns.

The Ponzi part of the scam requires manipulating the number of coins or the price of the coin (usually there is some legitimate mining/investing being done but at a much smaller scale than being reported).

This type of scam takes advantage of people who don’t understand how the distributed ledger works and thus don’t realise they could very easily fact-check their “returns” against the hash ID being cited.

Eventually, like when Bitcoin exploded onto the global scene last year and flirted with prices of US$20,000 per coin, people will want to cash out of their investment and the entire scam falls apart.

Also Read: This Malaysian startup wants to connect Founders with journalists, wins Vikingcubator pitching competition

In late December, a similar scheme that spanned from South Korea to the US was reported. It resulted in US$250 million being stolen from investors. This Ponzi scheme claimed to be mining Ethereum but only mined just enough coins to convince people the returns were real.

Coindesk reported that this week police busted a scheme in China resulted in US$13 million being stolen.


Copyright: artmagination / 123RF Stock Photo

The post Masterminds of Bitcoin Ponzi scheme ordered to pay multi-million dollar fines appeared first on e27.

Source: e27

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