Investors lured by famous dessert cafe franchise's name lose money in coin listing scheme

Allegations of investment fraud swirl around a coffee franchise

Investors put money in during 2022 on promises of a coin listing — four years later, nothing

Firm that recruited investors says it was also deceived

Franchise says trust broke down and the matter is already over

Parties' accounts conflict as police investigate

An AI-generated image illustrating cryptocurrency investment fraud. [Generated with AI]

Allegations of investment fraud have emerged involving a well-known dessert cafe franchise with hundreds of stores nationwide. During the 2022 cryptocurrency and NFT (non-fungible token) boom, a group of investors poured large sums into what they were told would be a franchise-backed coin listing that would generate shared profits. Four years on, the coin has never been listed and the investors say they have lost their money. They recently filed a complaint with police — but with multiple parties involved in the original coin issuance plan now pointing fingers at each other, the case has turned into a dispute over who is to blame.

'Invest in a coin set to list' — believers left with losses

The Gangnam Police Station in Seoul has booked the two co-chief executives of consulting firm A on fraud charges and is investigating them. Police summoned the complainant, identified as B, along with the two co-executives last month for questioning.

In 2022, firm A recruited investors by claiming that a well-known cafe franchise was planning to list a cryptocurrency. B invested 25 million won ($16,100) on the strength of that pitch. He had already entered into a private equity fund investment contract with firm A at the time and had received returns on that investment. Firm A then approached him with a proposal: rather than reclaiming his principal, why not convert it into a coin investment?

The complainant said he did not suspect anything was wrong because the cafe franchise issuing the coin was already widely recognized. He accepted firm A's proposal, agreed to convert his principal into a coin investment, and received the unlisted coin.

There was also a seemingly credible investor briefing session. The complainant and other alleged victims said a representative of the cafe franchise appeared in person and told attendees the franchise had connections with cryptocurrency exchanges. "They went that far, so we trusted them and invested," the victims said.

The coin was ultimately never listed. Whenever the complainant and other investors asked firm A about the listing schedule, they were told the timeline had merely been pushed back and that everything was proceeding normally. B alleged that firm A "knew in advance that listing was impossible, yet kept lying that it was in progress in order to avoid criminal complaints and demands for the return of investment funds."

B believes there are more victims beyond himself. The anonymous chat room for the coin he participates in already has 29 members. The investors who have banded together each claim losses of tens of millions of won. One person says they invested 80 million won — money set aside to buy a home for a newly married couple — and have yet to recover it.

Cafe franchise and investment recruiter trade conflicting accounts

Firm A, which recruited the investors, says it is the wronged party. According to the company, the franchise told it in 2022 that the coin would be listed that November. On that basis, firm A collected 300 million won from investors and passed it on, while also investing 50 million won of its own.

One of firm A's co-chief executives told The Herald Business: "We recruited investment funds believing the coin listing would happen, but there was no actual work being done to execute the listing. We were also deceived by the cafe franchise."

Firm A's co-chief executives also filed a police complaint against two people affiliated with the cafe franchise. The complaint stated that "the franchise built credibility by providing false information that the coin would be widely used, backed by its extensive store network," and that the franchise had presented a specific plan to offer discounts to customers who purchased beverages with the coin. Firm A also submitted to police records of wire transfers made to the cafe franchise's chief executive in 2022.

The two companies had not, however, entered into a formal investment contract with each other at the time. Police decided not to refer that complaint to prosecutors, citing insufficient evidence, and prosecutors reached the same conclusion.

Records showing a blockchain consulting firm's wire transfer of 80 million won — collected from six investors — to the chief executive of a well-known coffee franchise. [Provided by reader]

The cafe franchise tells a different story. A franchise representative told The Herald Business that while the franchise did work with firm A on the coin listing project, it decided midway through that firm A could not be trusted and ended the collaboration.

When asked about the purpose of the money firm A had transferred, the representative said it "was not received as investment funds for the listing," but declined to explain specifically what the money was for. The franchise said it is reviewing how to respond to the issues that have arisen over the coin.

With the accounts of the alleged victims, the consulting firm that recruited the investment funds, and the well-known cafe franchise that promised to list the coin all in conflict, the key issues going forward center on the relationship between the franchise and firm A, how the collected investment funds were used, and the reasons the coin listing never took place.

Lee Jeong-yeop, a former judge and managing attorney at law firm Rojipsa who previously served as president of the Blockchain Law Society, said: "If investment funds were recruited without any genuine intention to build a coin ecosystem or network, or if the funds were used for other purposes, it is possible to examine whether fraud has been committed."

Lee added that how the listing prospects and profitability were explained, and how the brand's credibility was used in attracting investment, could also be important factors in any legal judgment. He said that if investors were told the listing was guaranteed or that profits after listing were assured, stating facts that did not exist at the time could become a legal problem.

"Ultimately, the key is confirming what intent the party that received the investment funds had when recruiting investors, and where the funds actually went," he added.

snsd@heraldcorp.com
20ki@heraldcorp.com