Korean shipwreck ICO runs aground, investors may lose $8 million

Korean shipwreck ICO runs aground, investors may lose $8 million

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In another tale of an investment too good to be true, a South Korea treasure-hunting company – Shinil Group, proposed an ICO in June 2018.

The unusual ICO was based on the discovery of $130 billion in gold from the wreckage of the Russian cruiser Dmitrii Donskoi scuttled near Ulleung-do Island in 1905 in the Sea of Japan, after severe damage in the Russo-Japanese War.

The battleship was rumored to be carrying $130 billion in 5,500 boxes of gold bars and 200 tons of gold coins.

Shipwreck ICO storm clouds were clear

 

While it made for a great ICO pirate’s tale, there were storm clouds on the horizon from day one.

The company was launched with $900,000 in capital, just one month prior to the discovery of the shipwreck. Operations were shrouded in secrecy, with no website, no social media and no ICO whitepaper.

The Shinil Group did not apply for salvage rights from South Korea’s Ministry of Maritime Affairs and Fisheries and there were open disputes about who had ownership and the right to recover the treasure.

Numerous treasure hunters had previously claimed the ‘discovery’ of the Dmitrii Donskoi in the past two decades and other allegations said it was discovered 15 years earlier by the Korea Institute of Ocean Science and Technology (KIOST). Some Russian historians disputed claims the cruiser was carrying billions of dollars in gold.

Media coverage offered conflicting reports on the company’s plans, from returning 50% of the treasure to the Russian government, to providing 10% to develop tourism on Ulleung-do Island, and another 10% pledged to a government inter-Korean joint railroad project with Russia as well.

Hasty ICO plans and token announced

 

No sooner had Shinil Group announced the discovery of the shipwreck, several groups jumped into the battle for treasure.

Shinil Gold Coin ICO plansDonskoi International Exchange, a new cryptocurrency exchange pledged to give new users of their exchange bonus tokens called Shinil Gold Coins (SGCs), backed by the shipwreck treasure.

Another website, since removed, used similar logos, graphics, and website design to promote a Shinil Group ICO and Shinil Gold Coin. The ICO website oddly linked back to a shopping mall in Seoul. Both sites used the same web host, website registrar, and web administrative contacts.

Shinil Gold Coin camThe ICO website conducted pre-ICO sales to private investors, claiming the ICO would launch to the public on July 30 with Shinil Gold Coins to be listed on cryptocurrency exchanges in August and September. The price for one token was set at 10,000 Korean Won, equal to approximately $8.87.

Out of concern for investors, the Financial Supervisory Services of South Korea released a statement saying, “Investors need to be cautious as it’s possible they could suffer massive losses if they bank on rumors without concrete facts regarding the recovery of a treasure ship.”

Treasure hunters backtrack from claims

 

In a news conference, Choe Yong-seok, CEO of Shinil Group walked back the company’s earlier claims:

“The reports said the Donskoi held 200 tonnes of gold but that would only be 10 trillion won at current value,” he said.“We apologize to the public for the irresponsible citation.”

South Korea’s Financial Supervisory Service (FSS) began investigating claims of manipulation or unlawful trading in Jeil Steel, in which both current and previous leaders of Shinil bought stock earlier. Shares bounced up 139% following the “treasure ship” announcement.

Just another ICO shipwreck

 

South Korean police suggest more than 2,600 investors may have lost as much as $8 million in the treasure ICO scam. The Korea Herald says losses could go much higher according to police:

“If we find more related accounts or confirm cases in which investors used cash, the amount could go up,” the Seoul Metropolitan Police Agency’s Sophisticated Crime Investigation Unit said. “The number of victims could go down, however, if we exclude cases where the same person transferred money using different accounts.”

A former business partner of former Shinil Group CEO Ryu Seong-jin claimed to a magazine that as many as 200,000 people may have lost about 100 billion won ($89.5 million) in the Donskoi scam. Police received a court warrant to arrest Ryu on charges of fraud and masterminding the treasure ship scam.

It’s another hard lesson for ICO investors. If it looks and sounds like a shipwreck, it very likely is.