Firms use SpaceX, ChatGPT investments as bait for fraud, warns S. Korean watchdog

South Korea's Financial Supervisory Service (FSS) has issued a 'Caution' consumer alert, warning investors about fraudulent schemes that exploit the allure of investing in high-profile foreign unlisted companies like SpaceX and ChatGPT. These scams often involve investment advisory and asset management firms falsely claiming to offer exclusive investment opportunities with guaranteed high returns.

According to the FSS, some advisory firms have claimed exclusive partnerships with global investors, actively recruiting individuals by promoting investments in popular unlisted companies such as SpaceX, ChatGPT, Discord, and X (formerly Twitter). These firms allegedly promised investors returns of three to five times their investment upon the companies' future public listings. However, after investors deposited funds, they were unable to track their investment status through the firms' mobile applications.

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When asked to transfer funds to accounts in the name of a company or another person, refuse the transfer, and when entering into financial contracts through electronic means such as mobile apps, always request a contract and check its contents.

Further investigation revealed that the collected investment funds were allegedly used for acquiring stakes in affiliated companies. In other cases, firms solicited investment funds by offering to act as agents for participating in public offerings (IPO), using company-named accounts. They misled investors by claiming that acting as institutional investors would secure larger allocations and guaranteed high returns. After collecting funds, these firms presented fabricated share allocation certificates and settlement statements to encourage further investment, but refused to return the initial capital upon demand.

The FSS clarified that while registered investment advisory firms can offer advice on stock recommendations and portfolio strategies, they are prohibited from collecting and managing client funds. Similarly, asset management companies are not permitted to act as agents for IPO subscriptions on behalf of investors using the company's name. The FSS urged investors to refuse any requests for transfers to company or personal accounts, to always request and verify contracts when engaging in financial transactions via electronic means, and to report any suspicious activities immediately.

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We plan to conduct inspections in the second half of the year on advisory and management firms showing strong signs of illegal activity. If you receive similar investment solicitations or confirm suspicious cases, please stop transactions immediately and report them to the FSS or the police.