Authorities in South Korea has reportedly employed an Artificial Intelligence tool to figure out the masterminds behind a cryptocurrency-related Ponzi scheme that defrauded investors of up to $18.5 million.
According to a local news agency, Korea Joongang Daily, the arrested suspects (2 CEOs and ten members) carried out their plans through a members-only online shopping website and cryptocurrency exchange that started operating since May 2018.
The masterminds targeted people with little to no knowledge about cryptocurrencies, namely, older adults, retirees, and housewives and charged them huge membership fees upon signing up to the shopping website.
The unsuspecting victims got their returns by recruiting other members for seemingly higher fees and were also rewarded in M-Coin a token native to the exchange, but not listed on any other notable platform. In addition to the referral profits, the alleged fraudsters promised members that the value of the M-Coin token would rise significantly in the future from its value of 200 won ($0.17) to 600 won ($0.52) if they continued holding it.
However, authorities busted their plans by employing an AI tool that was taught to identify Ponzis and similar scams. Hong Nam-ki, a member of the South Korean Bureau reportedly noted how the machine led to uncovering significant details about the scheme.
First, he said that the Bureau used “keywords such as Ponzi, loan and recruiting members to teach the AI patterns of Ponzi schemes.” The training helped the AI tool to “identify advertisement patterns and the firm in question” while “evidence provided by an unnamed informant” backed up the findings.
Before the discovery and subsequent arrest, though, the suspects had amassed 21.2 billion won ($18.5 million) through membership fees and sales of the fake crypto token.
In a similar development last week, we reported that the Indian Supreme Court granted interim bail to two men behind an alleged $300 million crypto fraud.
Subscribe to our Telegram channel to stay up to date on the latest STO and crypto regulations news