A fraud ring that lured investors with promises of interest income and built a fake XRP staking website has been arrested. The main suspects are seen being taken into custody. [Seoul Metropolitan Police Agency]
A fraud ring that lured investors with promises of interest income and built a fake XRP staking website has been arrested. The main suspects are seen being taken into custody. [Seoul Metropolitan Police Agency]

"FXRP, as I will explain, represents a new beginning for the XRP ecosystem. Through FXRP staking — a method where you deposit virtual assets and receive rewards in coin form — we pay monthly XRP interest of 1.5 to 1.8 percent. You will receive XRP rewards worth between 750,000 and 900,000 won per month."

A fraud ring that lured investors with promises of fixed monthly returns has been arrested after swindling 12.3 billion won ($8.48 million) through a fake XRP staking website. Police managed to freeze virtual assets holding the criminal proceeds within three days of receiving a tip, but roughly 10 billion won had already vanished beyond tracing.

The Seoul Metropolitan Police Agency's Cyber Investigation Unit announced Thursday that it had arrested three suspects on charges including violations of the Act on the Aggravated Punishment of Specific Economic Crimes (fraud) and the Act on Similar Receiving of Funds, and had forwarded two of them to prosecutors in detention. Police have also obtained an arrest warrant for an accomplice believed to be abroad and have requested an Interpol red notice.

According to police, the suspects set up a fake investment website called "Fxrpntwork.com" between Oct. 16 and Oct. 23 last year, falsely claiming they would pay monthly returns of 1.5 to 1.8 percent on deposited XRP. They are accused of collecting about 3.4 million XRP — worth approximately 12.3 billion won — from 71 victims.

The largest individual loss among the victims reached about 1.6 billion won.

The fraud ring hired stand-in actors to make the fake investment site appear legitimate. A stand-in actor is seen posing as an expert and presenting false information, claiming investors would receive XRP rewards worth between 750,000 and 900,000 won per month. [Seoul Metropolitan Police Agency]
The fraud ring hired stand-in actors to make the fake investment site appear legitimate. A stand-in actor is seen posing as an expert and presenting false information, claiming investors would receive XRP rewards worth between 750,000 and 900,000 won per month. [Seoul Metropolitan Police Agency]

Staking is an investment method in which virtual assets are deposited for a set period in exchange for rewards. Investigators found that the suspects targeted investors with a strong interest in this type of investment.

The gang built the fake site by appropriating the name of "FXRP," a virtual token based on the real blockchain project Flare Network and XRP.

They timed the launch of their scheme to coincide with the actual release of the FXRP token, investigators found, in a deliberate effort to avoid arousing suspicion among investors.

Their promotional efforts to deceive investors were equally calculated. They produced videos featuring stand-in actors to walk viewers through how to use the fake site, and spread false investment information across Naver blogs, Wikipedia and YouTube channels.

Victims who believed the claims transferred XRP they held on domestic exchanges through overseas exchanges and into electronic wallets designated by the suspects.

The suspects then laundered the funds by converting the XRP into other virtual assets — including Bitcoin and Tether — through overseas exchanges and dispersing the proceeds across multiple wallets to evade police tracking, investigators found.

Police launched the investigation after receiving a tip that FXRP staking fraud victims were emerging in rapid succession on overseas cryptocurrency exchanges. After analyzing the movement of virtual assets, they identified and froze approximately 17.3 billion won worth of virtual assets held across multiple overseas exchanges — all within three days of opening the probe.

Police then identified the ringleader, a 29-year-old identified only as A, by analyzing the process of building the fake site, domain purchase records, internet access logs and communications among the suspects.

An accomplice, a 29-year-old identified as B, learned of A's arrest and went on the run — switching off his mobile phone and moving between Seoul, Gyeonggi Province, Busan and Daegu — but was eventually tracked down and arrested at a hideout.

Police are keeping open the possibility of additional victims and continuing their investigation into other accomplices, while pursuing pre-indictment confiscation and collection preservation procedures against the criminal proceeds.

A police official urged the public to exercise caution, warning that fraud schemes disguised to resemble newly launched investment systems are proliferating rapidly.


kido@heraldcorp.com