[News Today] ART GALLERY’S PONZI SCHEME

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In a deceptive art-investment scheme, a group has been arrested for swindling over 90 billion won from investors, promising a 1% monthly return on art purchases. This turned out to be a classic Ponzi scheme, funding payouts to earlier investors with new contributions.

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A promotional video of an art gallery.

It says those who purchase artworks and consign them to the gallery will receive high returns.

Art gallery's promotional video/(VOICE MODIFIED)
I began investing in art, I will receive 1% in profits every month.

The gallery also promised a guarantee of the principal and monthly royalty fees.

Art gallery's promotional video/(VOICE MODIFIED)
There will be revenues from exhibitions and PPL royalty fees.

More than 1100 people poured their money into this 'art investment scheme' between June 2019 and October 2023.

But it turned out to be a con.

It was a so-called Ponzi scheme, whereby existing investors are paid money disguised as return-on-investment using funds collected from new investors.

The way it works is quite simple.

The gallery paid artists 1% of their work value and received photocopies in the form of image files.

It later showed them to investors to make it appear as if they were generating profits.

The gallery stole over 90 billion won, or around 68 million dollars, in investment funds using this fraudulent method.
Most of the money was used to pay the gallery owner's personal business expenses or to buy luxury goods.

Kang Jung-seok / Seoul Metropolitan Police Agency
Rather than investing in art unsuspectedly, make sure to verify the existence of artworks and the authenticity of documents.

Police have arrested three individuals including the owner of the gallery, and confiscated some 12.2 billion won, or approximately 9 million dollars, in criminal proceeds before indictment.