South Korea Investigates Crypto Startup That Touted Shipwreck Gold

Crime, News | August 1, 2018 By:

South Korean police are investigating a cryptocurrency startup that claimed to have discovered a sunken Russian warship with $8.9 billion worth of gold on board.

Earlier this month, South Korean startup Shinil Group announced that it had found the 5,800-ton Dmitri Donskoii, a first class armored cruiser, first set sail in 1885. The company originally claimed that the Russian Navy warship, which sunk in 1905, was loaded with 150 trillion won ($131B USD) worth of gold, but lowered that figure in a press conference on July 26.

Shinil Group allegedly launched its own cryptocurrency, called Shinil Gold Coin, which investors bought with the promise of being able to redeem tokens for treasure from the ship. The cryptocurrency reportedly attracted 60 billion won ($53.7M USD) in investments from around 100,000 investors since its launch this year, despite the lack of evidence that the ship contained anything of value.

On Monday, Seoul’s Gangseo District Police issued a travel ban on Choi Yong-seok, the CEO of Shinil Group, and others associated with the company and are planning to interrogate them as part of the alleged fraud case. According to the police, the alleged investment scam also involved Yu Ji-beom, head of a Singapore-based affiliate of Shinil Group.

Seoul’s Gangseo District Police is also looking into whether the suspects at Shinil Group attempted to profit from the fluctuations in share prices of Jeil Industries. The police said share prices for Jeil Steel Manufacturing Co. surged on the South Korean stock market after Ryu Sang-mi, former head of Shinil Group, became the second largest shareholder in the steel company. Jeil Steel, however, said it had nothing to do with Shinil’s ship salvage project.