Authorities Investigate ‘Sunken Treasure’ Crypto Scam
A recent report on Coin Telegraph focused on the police investigation involving the South Korean startup, Shinil Group, and their alleged scam. They claim to have uncovered a sunken 100-year-old Russian warship with gold inside. Investors were promised a share of the proceeds if they fund the firm’s cryptocurrency.
The Seoul-based company announced last July 26 that they located the Dmitrii Donskoi, a 5,800-ton Russian Navy ship which sunk in 1905. They implied that the warship contains gold cargo worth 150 trillion won (€117 billion). Shinil Group CEO Choi Yong-seok did point out that there was no real indication that there was actual gold within the sunken relic. Despite that admission, however, the company reportedly raised 60 billion won (€47 million) from 100,000 investors. A travel ban has been issued on Choi and his associates, and the police intend to take them in for questioning.
The Shinil Group’s aforementioned activity may be illegal, but the truth is that many people still fall victim to such schemes because of the enticing value of gold. It remains highly coveted, as it has always been used to back currencies and fund various forms of trade. The US dollar was originally based on the value of gold in federal vaults. In addition, some exchange-traded funds (ETFs) are backed by gold, and FXCM explains that futures contracts can correspond to gold transactions as well. Due to its relatively stable price, gold is considered a safer asset, as opposed to other forms of investment.
More recently, a new type of gold-backed trading is coming out in the form of cryptocurrency. Blockchain tech is providing a more precise method of accounting, and the biggest cryptos like Bitcoin become more publicly accepted. This market ushered in a new ‘gold rush’ where companies are looking into developing their own gold-backed cryptocurrency. As the industry continues to grow, however, some people are exploiting the trend for fraudulent activities.
The method is generally simple: one unit of the new cryptocoin equates to a certain value of gold (e.g. 1 cryptocoin = 1 gram of gold). Goldscape notes that a third party usually holds on to the actual gold that’s used to back the cryptocurrency. It can be traded with other owners of said cryptocurrency. The minimum value of the coin will always match the market price of the precious metal. The goal is to trade the new cryptocurrency in large volumes to drive up its value and surpass the actual price of gold. There are already many existing forms of trustworthy cryptocurrency on the market right now:
1. Golden Currency – It is currently being developed by a startup in Singapore. They aim to have the first global currency that is backed 100% by gold. It will come out in two forms – paper and electronic.
2. Airgead Coin – Created by an Irish startup that bases its tokens not just on gold but other precious metals like silver, platinum, and palladium.
3. Egold – Comes from a London startup which keep investments secure through a patented blockchain system. It logs a detailed transaction history of every unit of the digital currency.
While there are legitimate cryptocurrency firms out there, be wary of others that may be conducting illegal operations. Coin Diary previously listed down tips on how to avoidonline scams related to cryptocoins.
• “If it sounds too good to be true, it probably is.” If the cryptocurrency promises to increase your investment hundred fold in a few weeks time, you’re probably best to steer clear of it.
• Do background checks not just on the company’s history, but on the people running the business as well. Inquire about their credibility and qualifications from others who know them.
• Examine the company’s investment strategy in terms of clarity and coherence.
These tips will help you discern legitimate cryptocurrency firms and avoid suspicious companies like the Shinil Group.