Fraud and Hype: Filtering Them Out with Numbers

1.A Checklist of Warning Signs

Financial fraud keeps changing its appearance, but the way it moves people is remarkably similar. It plays on the hope of making big money easily, the urgency of "now or never," and the feeling of being let in on a special opportunity. If even one of the items below applies, stop and check first. If several apply at once, it is safest to assume it is very likely a scam.

In particular, "your principal is guaranteed and the returns are high" does not add up. To protect principal, money has to sit somewhere that doesn't swing much, and such places usually have low expected returns too. To aim for high returns, you have to accept the chance of loss. Someone who promises both at once cannot explain who is bearing that risk. Note also that the deposit protection we saw in Lesson 7 covers only deposits within set limits; it does not protect investment returns.

• They "guarantee" high returns, or promise "guaranteed principal + high returns" together
• They give you no time to think: today only, first come first served, closing soon
• They tell you not to tell anyone, not even your family, and to keep it secret
• They pay commissions or bonuses for bringing in friends and acquaintances
• When you ask whether they are registered or licensed, they dodge the question or say it's fine because they're an overseas company
• They want to move you to a private messenger "tip room" or closed group and give you buy and sell instructions
• They tell you to buy in advance a coin that is "about to be listed" or one being "given away for free" (an airdrop)
• They contact you posing as a financial company, an agency, or someone you know, and ask for money transfers or personal information
• They ask you to install a remote-control app or share your screen
• They tell you to pay taxes or fees first before you can withdraw

2.Turning "10% a Month Guaranteed" into a Year

10% a month sounds small. But multiply it 12 times with the compounding you learned in Lesson 1 and you get 1.1^12 ≈ 3.14: your money becomes about 3.14 times larger in a year. As an annual return, that is about 214%. After 2 years it is 1.1^24 ≈ 9.85 times, and after 3 years 1.1^36 ≈ 30.9 times.

Anyone who could really earn returns like that consistently would have almost no reason to collect other people's money. Investing only their own money, they would become enormously rich within a few years, and if they needed more money, they could borrow it at far lower interest. What's more, as we saw in Lesson 8, high expected returns usually come with high risk, yet this promise offers high returns and a "guarantee" together. That is a contradiction in itself.

3.Ponzi Schemes: Paying Old Investors with New Money

A Ponzi scheme earns no real money; instead, it pays "returns" to earlier investors out of the money put in by later ones. Early participants get paid as promised, so they believe it is real and recommend it to others, and that word of mouth brings in new money. This is why such schemes pay commissions for bringing in friends and acquaintances.

Here is a hypothetical example. Each month 10 people put in $1,000,000 each, and everyone is promised 10% a month ($100,000). The result is the same even if we assume the operator doesn't steal a cent. Once new participants stop after 4 months, the remaining cash shrinks by $4,000,000 every month, and by month 12 it can pay only half of that month's payouts. The moment many people ask for their principal back at once, it collapses.

In this kind of scheme, the fact that early participants really received money proves nothing. What they received was not profit but other people's principal. The more reviews saying "I really got paid," the more they simply show how much new money was needed.

4.Cherry-Picked Returns and the Illusion of Seeing Only Survivors

Hype can mislead without telling a single lie. The most common method is selection: showing only a period when prices rose a lot, using a chart that starts at the lowest point, or printing reviews only from people who made big gains. As we saw in Lesson 8, an "average return" also depends on whether it is an arithmetic or a geometric average.

There is also the illusion of seeing only what survived (survivorship bias). As an example, assume someone sends 1,024 people a prediction, telling half that a price will rise and half that it will fall, and then sends the next prediction only to those who received the correct one. After five rounds, 1,024 ÷ 2^5 = 32 people will have received five correct predictions in a row. To those 32 people this person looks like a genius, but it is really the result of coin flips, not skill.

• What period do the returns cover, from when to when, and why that period?
• Where are the people who lost money and the products that disappeared?
• Are the figures after fees and taxes?
• Are past returns being presented as if they were a promise about the future?

5.How to Check, and What to Do Right After Being Scammed

In Korea (as of 2026), you can check whether a company is licensed or registered by using the regulated financial company search on the FSS consumer portal 'FINE'. Collecting money while promising to return more than the principal without a license or registration is illegal fund-raising, prohibited under Korean law (the Act on the Regulation of Conducting Fund-Raising Business without Permission). Check through an official channel you look up yourself, not through a link or phone number the company sent you. Rules and procedures can change, so check official guidance from the Financial Supervisory Service and other official bodies.

If you have already sent money or handed over personal information, act immediately instead of losing time out of embarrassment. In Korea, report it to the police at 112, and tell the call center of the bank or other financial company you sent the money from, asking right away whether measures such as a payment suspension are possible. The faster you act, the better your chances of limiting the damage.

• 1. Stop sending money. "Pay a withdrawal fee and we'll return it" is part of the same scam
• 2. Report to the police at 112, and ask the call center of the financial company you sent money from whether a payment suspension is possible
• 3. If you installed a remote-control app, delete it and change your passwords
• 4. Take screenshots of chat logs, deposit records, and website addresses, and keep them
• 5. Beware of anyone offering to "recover your lost money": a second scam is a common tactic