Tokyo Police Arrest Eight Suspects Allegedly Behind Pyramid Scheme

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Eight suspects have been apprehended by the Tokyo police over allegations of running a cryptocurrency pyramid scam which has purportedly amassed over 7.8 billion yen or $68.4 million, local newspaper Asahi Shimbun reported Wednesday.

The suspects advertise the scam as a U.S. investment firm called “Sener,” hosting seminars with foreign speakers, of which one has been recorded by the police and was uploaded on YouTube. As seen on the video, the suspects lure investors by promising between 3 to 20 percent capital gains for the investment, in addition to talking them into recruiting more potential investors with a promise of additional commissions.

As investigators alleged in the report, over 6,000 people across 44 prefectures including in Tokyo have so far been defrauded by the suspects, prompting 73 investors to file a class action suit before the Tokyo District Court, as the victims seek over $3.2 million in damages. Six of the eight suspects have so far pled guilty to the charges, while the remaining denied the accusations, Asahi Shimbun reported.

The Tokyo police suspect that the defendants attempted to circumvent prosecution by using digital currencies which, as it stands, still remains in a “gray zone” under current Japanese regulations. According to the country’s Financial Services Agency (FSA), digital assets are currently not classified as securities and therefore do not fall under the jurisdiction of Japan’s prevailing regulations. However, the FSA noted that such assets may be regulated based on the investment structure.

For years, Japan has maintained a soft approach to the cryptocurrency industry and has remained largely constant despite the growing cases of crypto heists involving domestic digital currency platforms, including Coincheck and Zaif.

In October, domestic crypto exchanges in Japan have been granted a self-regulatory status after the FSA’s license issuance, allowing domestic local startups to operate in the jurisdiction. Around that same month, the Japanese taxation policy committee held a discussion to deliberate over the prevailing legal framework encompassing how cryptocurrency gains should be reported for taxation purposes.