Police Probe Firm Luring Investors in ICO with Wrecked Ship Treasures

South Korean police have raided the offices of Shinil Group, which is suspected of scamming investors with the launch of an ICO backed by gold reportedly coming from a sunken Russian battleship.

The Seoul Metropolitan Police Agency has raided the offices of Shinil Group, sending 27 investigators from its white-collar crime unit to search its premises on Tuesday on suspicions of possible ICO scam, The Korea Herald reported. The trigger was the launch of an initial coin offering (ICO) that Shinil backed with gold it claimed to have obtained through the discovery of Russian battleship Dmitri Donskoi, which sank in 1905 and was rumored to contain about $116 billion worth of gold.

The investigators searched several Shinil locations and confiscated evidence on suspicion that the company had fabricated the Russian treasure story to attract investors, according to the Korean news agency Yonhap.

Through its affiliate in Singapore, Shinil issued a token called Shinil Gold Coin (SGC), backing it with the gold from the sunken ship. Investors bought tokens on the promise those would later be exchanged for the treasure.

The company has claimed the coin's value would surge from the current 200 Korean won (about $0.18) to 10,000 won (almost $9) by the end of September. According to different sources and estimates, the ICO has managed to attract approximately 100,000 people and raise as much as the equivalent of $50 million.

However, local media soon started raising doubts, with experts pointing out it made no sense for Russia to load a battleship with such treasure, and there was a much safer railroad route to Vladivostok, the cargo's destination. Suspicions began to grow that the entire treasure announcement was made to mislead people and convince them to invest money in Shinil’s cryptocurrency.

Shinil retreated on its initial estimates, announcing on July 26 it had revised the value of the gold down to only about $8.9 billion. Choi Yong-Seok, the CEO of the South Korean company, explained that the previous numbers were based on news reports and unverified information. However, the company has not denied until today the ship’s discovery.

Moreover, Yong-Seok also insisted that his company had no connection with Shinil Group in Singapore despite their shared focus on the treasure of Dmitri Donskoi. As a result, financial regulators launched a probe into the Seoul-based entity, while South Korean police initiated a criminal investigation into alleged fraud.

South Korea is known for its tough approach to ICOs and cryptocurrencies. The government banned ICOs in 2017 and implemented strict rules for companies dealing with digital assets.