South Korean-based cryptocurrency exchange CoinUp has been exposed as a Ponzi scheme. Its CEO Kang-mo has been sentenced to 16 years in prison for his role in defrauding investors of KRW 450 billion equivalent to USD 384 million.
Apparently CoinUp executives promised investors guaranteed gains of up to 200% in just 4 to 10 weeks, when in fact, the crypto investments offered were actually fake cryptocurrencies. In order to gain the confidence of investors, there was a photoshopped magazine of Kang-mo standing next to South Korean President Moon Jae-in in the CoinUp office.
Further, evidence indicates that CoinUp paid early investors with deposits from later investors. This is the structure of a classic pyramid — also known as a Ponzi — scheme and causes early investors to think CoinUp is trustworthy, which causes early investors to tell their friends and family which lures in even more investments.
CoinUp’s CFOs Kwon and Shinmo were also sentenced to 11 years in prison, with CoinUp’s ‘governor’, Yunmo, and his mother-in-law receiving seven years in prison. Other CoinUp executives received sentences between six and nine years.
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