How Artificial Intelligence Helps Police Catch Ponzi Schemes?

How Artificial Intelligence Helps Police Catch Ponzi Schemes?

Seoul Special Judicial Police Bureau for Public Safety arrested the CEOs and key players of a cryptocurrency pyramid scheme using the help of AI (Artificial Intelligence) last Thursday.

The two main suspects known as Lee and Bae stole a total of 21.2 billion won ($18.3 million in US-Dollars) in a span of 6 months - 12 people were arrested in total.

Just a sudden attempt to express the concept of crime.
Photo by niu niu / Unsplash

The South Korean police reported the CEOs of this company set up a "members only" shopping website and cryptocurrency exchange in May 2018.

The site recruited members for an annual fee of 330,000 won ($288), or a "premium" membership fee of 990,000 won ($864).

It also offered 10-year memberships with discounts on hotels, leisures, and on events like weddings and funerals.

Like all pyramid schemes, it gives incentives for recruitment.

It awarded members with 60,000 won ($52) in cash for recruiting new victims and another 120,000 won ($104) if the new victim also brought a friend to join.

The recruiters were also given 600 M-Coins per enrollment. M-coin is an unlisted cryptocurrency issued by the exchange.

100 Bani is enough to please a kid ready to choose what he’ll spend his little monies on.
Photo by Jordan Rowland / Unsplash

M-coins could also be purchased on the exchange.

Bae and Lee told investors the coins would grow significantly  in value from 200 won ($0.17) to 600 won ($0.52), and they would be able to profit immediately.

Artificial Intelligence taught to identify patterns of Ponzi and pyramid scams using key words like "recruiting members" and "Ponzi" aided the police in this crackdown.

“Through keywords such as Ponzi, loan and recruiting members, we were able to teach the AI patterns of Ponzi schemes.”

Said Hong Nam-ki, the section chief of the bureau’s second investigation team.

“The program can also identify advertisement patterns and identified the enterprise in question, which [was caught] with evidence provided by an unnamed informant."

According to a report from Korea JoongAng Daily, the CEOs of this scam company hid their accounting informations, data about members, and cash flow in a corporate server in Japan.

They moved their accounting office overseas into a private house and hid incriminating computers in an employee's car when the investigation began.

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Photo by Jordan Harrison / Unsplash

The company recruited around  56,000 people, and in a stakeout by the police, Hong Nam-ki added that "most people attending the swindler’s presentation for membership were elderly people in their 60s and 70s."

Elderlys and housewives were targeted due to their lack of knowledge in cryptocurrencies.

Decentralized digital assets and blockchain have done wonders for the world with huge corporations like IBM and Facebook adopting its technology.

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But being new and unregulated, it does leave a lot of room for error and many con artists and swindlers abuse this to target vulnerable unsuspecting people.

Another  international pyramid scheme, OneCoin, was caught earlier this year in USA.

Hopefully with the help of this new AI Technology, scams and money laundering won't be the first thing many people think of when talking about cryptocurrencies.

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