A special investigating team in Seoul, the capital city of South Korea, using AI has succeeded in stopping a Ponzi scheme. According to the Police report, people who were behind this scheme stole $18.7 million from 56,000 investors.
According to the report by the South Korean newspaper JoongAng Daily on Monday, the special public security division of Seoul Police, arrested the executive managers of an online shopping website and a Bitcoin company which was known by the family names of Lee and Bae, and 10 more people confessed they were involved in the Ponzi scheme.
The Police department of Seoul said that executive managers launched the online website and crypto exchange last year in the Gangnam region in Seoul that only gave services to its users. From May to October 2018, the suspects would register new users for 330,000 won ($288) annually or 990,000 won ($864) insurance cost and would give a 10-year discount right to products for them.
This newspaper has reported that the scammers have targeted people who did not exactly know how cryptocurrencies work and by using valuable rewards and free cryptocurrency as tricks would defraud them. After that 12 people who were involved in this fraud were arrested, the police department announced that most of the victims of this fake scheme were senior citizens between the ages of 60 to 70.
Using AI to Catch Scammers
Obviously, the police department used the “researcher” of the AI to investigate the Ponzi scheme. Hong Nam-ki, the head of the second investigating team of the police department had told to news sources that they were able to teach the AI about the Ponzi scheme models by keywords such as Ponzi, giving the loan, and employing.
How Did Fraud Used to Take Place?
The Ponzi scheme which began from May 2018, included 201 offices. This scheme by incentivizing managers and members would ask them to enter other people into this pyramid scheme. This company continued its operation this way and would give the managers who brought in a lot of members 100-dollar cash prizes.
Lee and Bae gained a large portion of their money by selling an unreal cryptocurrency named M-coin each token whereof had a value of $0.087. They promised the members of this company that the value of this fake cryptocurrency would increase up to $52 and its profit would be 600 percent.
Unlike all Ponzi scammers that are easily visible and traceable, Lee and Bae kept the least amount of info about the money stream and members, and when they found out police was looking for them, they moved their accounting info to a server in Japan and then they were trying to move to a private house.
A Positive Sign for Regulations
This incident can be a turning point in the field of regulations of cryptocurrencies all across the world. Some countries due to some scams and incidents have a negative stance toward cryptocurrencies. For example, after the fatal impacts of scams such as Bitconnect, India mostly has a hostile stance regarding cryptocurrencies.
For such countries where often a non-functional and weak government is in power, adding the financial devaluation of cryptocurrencies, will lead to harsh regulations in this field. Because for these countries banning cryptocurrencies and refusing to recognize them is easier and cheaper than if they want to accept these currencies with the costs of establishing crime and threat are combatting organizations.
Yet, successful use of AI to eliminate cryptography scams can change such images and preconceptions. If technology is available widespread, then these countries won’t have to provide powerful legal resources to combat these threats. Also, this would lead to a serious decrease in the price of accepting cryptography.