MiningMax Ponzi Scheme

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MiningMax

MiningMax purported to offer an investment service that would mine using investors funds. The company, in fact, spent only a small amount ($80m) on mining equipment, and the rest was distributed to the leadership. When the company failed to pay out on their promised returns, authorities got involved and arrested the team. It is unclear if investors stand to receive any of their funds back.

This exchange or platform is based in South Korea, or the incident targeted people primarily in South Korea.

About MiningMax

"Mining Max [was] a cryptocurrency mining company headquartered in Las Vegas."

"About 18,000 investors from over 54 countries turned to the Mining Max platform to help them capitalize on the crypto industry. The benefits they promised didn’t just stop at Bitcoin though. According to the International Business Times, their high-performing mining farm in Seoul mined cryptocurrencies from different blockchains, supposedly giving these investors the option of putting their money on currencies that would offer higher returns."

"About 14,000 investors are from South Korea. A total of 2,600 is from the US, 600 are from China and the rest are from Japan and other countries."

"The company actually worked like a pyramid scheme, requiring people to pay to become an affiliate and rewarding them for getting others to sign up." "Using the same hook as previous successful schemes, MiningMax promised investors a guaranteed daily return on their investment. The site required minimum deposits of $3,200 and rewarded investors who recommended others with a $200 referral commission."

"Stay Safe Online did a review article in June this year that not only detailed their tiered ROI structure but also raised the question of whether or not Mining Max was a scam."

"Even after such high profile Ponzi schemes by the likes of Bernie Madoff and Jan Lewan were brought to justice, pyramid and Ponzi schemes remain a widely utilized form of fraud in the world. Sadly, this now includes cryptocurrency as well. MiningMax, just for one example, was a South Korean Ponzi scheme active from 2016 through most of 2017. The website promised too-good-to-be true investment opportunities and, in true pyramid scheme fashion, offered a referral bonus as well."

"This month, a $200 mln cryptocurrency-inspired Ponzi scheme was unraveled by the local law enforcement. 14 individuals of MiningMax, a cloud mining Ponzi scheme, were arrested by South Korean police with several charges, including economic crime and fraud."

"Even though they promised these high returns based on their mining activities, the platform’s money was actually made through a pyramid scheme. Users would have to pay to become members and then were compensated for recruiting new business."

"The cracks began to show when their mining endeavors failed to make enough money to pay their lower-level investors. According to Yonhap News Agency, those higher up on the food chain were paid with funds obtained through the scam, in addition to certain expensive items."

"By December 2017, the website was exposed and 14 people were arrested. The exact amount stolen by these fraudsters is unknown." "A total of 21 suspects were charged with fraud and violating South Korea’s law on door-to-door sales. Three other people with ties to the company, including Korean singer Park Jung-Woon, were charged with embezzlement but were not held." "Seven others, including company chairman Daniel Park, the vice chairman, and some top investors, are on the run and have been put on an Interpol wanted list."

"Another seven co-conspirators, including Mining Max chairman, Daniel Park, its vice chairman and high-level investors have gone into hiding, but have been placed on one of Interpol’s wanted lists." "The suspects, which include the company’s chairman and vice chairman, as well as a Korean singer popular in the 1990s, are accused of embezzling about $250 million from 18,000 investors in 54 countries, including the United States, South Korea, China and Japan, Yonhap News Agency reported."

"According to Yonhap, investors were scammed out of approximately $250 million, of which $80 million was spent on mining hardware. About $110 million is probably sitting in offshore accounts somewhere, while the remaining money was used to pay high-level investors, and of course, to line the pockets of the platform’s management team."

"Of all the suspects, 21 were indicted by the Incheon District Prosecutors’ Office on charges of fraud and for violating the country’s law on door-to-door sales. Mining Max has a cryptocurrency mining farm in Seoul, and promises investors profits from its high-tech mining facility. Since the company was mining currency from different blockchains, it purportedly gave investors the option to choose to mine the currency that offered them the best returns."

"Even though the MiningMax scheme was shut down, the Internet is full of websites which use technical terms and guaranteed returns in order to dupe investors. Sites such as Bitcoin Code and Bitcoin Revolution share many similarities with proven Ponzi schemes, but oftentimes these sites are not investigated since victims are embarrassed to report their poor judgement."

This exchange or platform is based in South Korea, or the incident targeted people primarily in South Korea.

The background of the exchange platform, service, or individuals involved, as it would have been seen or understood at the time of the events.

Include:

• Known history of when and how the service was started.
• What problems does the company or service claim to solve?
• What marketing materials were used by the firm or business?
• Audits performed, and excerpts that may have been included.
• Business registration documents shown (fake or legitimate).
• How were people recruited to participate?
• Public warnings and announcements prior to the event.

Don't Include:

• Any wording which directly states or implies that the business is/was illegitimate, or that a vulnerability existed.
• Anything that wasn't reasonably knowable at the time of the event.

There could be more than one section here. If the same platform is involved with multiple incidents, then it can be linked to a main article page.

The Reality

This sections is included if a case involved deception or information that was unknown at the time. Examples include:

• When the service was actually started (if different than the "official story").
• Who actually ran a service and their own personal history.
• How the service was structured behind the scenes. (For example, there was no "trading bot".)
• Details of what audits reported and how vulnerabilities were missed during auditing.

What Happened

The specific events of the loss and how it came about. What actually happened to cause the loss and some of the events leading up to it.

Key Event Timeline - MiningMax Ponzi Scheme

Date	Event	Description
June 15th, 2018 12:00:00 AM	Main Event	Expand this into a brief description of what happened and the impact. If multiple lines are necessary, add them here.

Total Amount Lost

The total amount lost has been estimated at $250,000,000 USD.

How much was lost and how was it calculated? If there are conflicting reports, which are accurate and where does the discrepancy lie?

Immediate Reactions

How did the various parties involved (firm, platform, management, and/or affected individual(s)) deal with the events? Were services shut down? Were announcements made? Were groups formed?

Ultimate Outcome

What was the end result? Was any investigation done? Were any individuals prosecuted? Was there a lawsuit? Was any tracing done?

Total Amount Recovered

There do not appear to have been any funds recovered in this case.

What funds were recovered? What funds were reimbursed for those affected users?

Ongoing Developments

What parts of this case are still remaining to be concluded?

Prevention Policies

Having funds held in the hands of a single individual, with out a multi-sig, and no training/registration for key holders, led to a situation where investors funds could be taken and used in unexpected ways. By having a system of registration for crypto firms, authorities can ensure that all platforms are operating as specified.