In a case of fighting fire with fire by fighting technology with technology, South Korean authorities have used artificial intelligence (AI) to help nab 12 suspects for involvement in an elaborate cryptocurrency Ponzi scheme that cheated more than 56,000 people of KRW 21.2 billion (USD 18.6 million).

According to local media outlet Korea Joongang Daily (Apr 8), the Seoul Special Judicial Police Bureau for Public Safety (SSJPBPS) arrested the two CEOs of an online shopping website and a Bitcoin enterprise along with 10 others for recruiting people to be part of their illegal pyramid scheme for six months starting in May 2018.

Independent of the police, SSJPBPS is a bureau consisting of civil servants granted with powers of investigation. They used an “AI investigator” to track down the suspects by programming it to recognize critical keywords such as “Ponzi”, “loan”, and “recruiting members” in an attempt to teach it Ponzi scam patterns.

“The program can also identify advertisement patterns and identified the enterprise in question, which [was caught] with evidence provided by an unnamed informant.” section chief of the bureau’s second investigation team, Hong Nam-ki said.

The detailed pyramid scam was based around the members-exclusive online retail portal and crypto exchange set up by the two suspect CEOs. While members had to pay annual fees, they were told they could earn rewards in cash and crypto for recruiting other people to join – KRW 60,000 for adding a new member, and an additional KRW 120,000 should that new member in turn bring in another. Rewarded members also earned 600 M-coins, the exchange’s native but unlisted token which could be resold for KRW 100 to KRW 500 per token.

The highly profitable scam even saw its crypto exchange running 201 business offices. It managed to keep itself under wraps because the CEOs had hidden accounting data in a corporate server in Japan.

Like many other similar crypto scams, the bulk of the victims who fell prey were housewives, the elderly, and retirees who may not have much knowledge of crypto.  SSJPBPS said that in its stakeouts, it noticed the majority of people attending presentations made by the Ponzi scam to be those aged in their 60s or 70s.

Around the beginning of 2019, criminals responsible for OneCoin – a Ponzi scheme promoted as a crypto coin with a private blockchain – were arrested by the police.