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Russian 'treasure' ship stirs South Korean stock frenzy

A Singapore company, cryptocurrency and lure of dividends also come into play

A 2-month-old South Korean company says the wreck pictured here is the Dmitrii Donskoi warship, which sunk in 1905.

SEOUL -- A full-page advertisement in a South Korean newspaper last month excited researchers, investors and treasure hunters alike. It seemed to be related to news that a company called the Shinil Group had discovered a Russian warship that sank 113 years ago -- and that the ship could hold more than $100 billion worth of gold.

The Dmitrii Donskoi sank in 1905 off South Korea's Ulleung Island, and in the past tales that it contained a bounty of gold coins and bars has piqued people's imaginations.

The South Korean company Shinil Group is unfamiliar to researchers, investors and treasure hunters alike. And there is confusion with another company named Shinil Group, in Singapore.

The newspaper ad said Shinil, one or the other, would soon show video of the Donskoi wreck and, in the first half of 2019, distribute dividends worth 10% of the value of the treasure that it estimated at 150 trillion won ($133 billion) to holders of the Shinil Gold Coin cryptocurrency.

On July 17, Shinil released a statement with photos and video of the shipwreck, news of which made headlines around the world.

The treasure hunt spread to the stock market. Shinil was established on June 1 and is believed to have agreed to buy a large stake in Kosdaq-listed Jeil Steel soon after it launched.

Following the July 17 statement, Jeil Steel's share price briefly topped 5,000 won, ending the day at 4,160 won. Before the frenzy, the shares had hovered around the 1,500-won line.

Later, after Jeil Steel denied it is linked to the treasure ship, its shares dropped.

The confusion, the virtual coin and its promised dividends have invited skepticism -- and the attention of financial watchdogs. South Korea's Financial Supervisory Service is looking into the episode for possible stock price manipulation.

Fears are now growing among Shinil Gold coin buyers that they will never see any dividends. Many have begun to organize via social media and are talking about how they collectively might take legal action.

Amid the hubbub, Shinil Group held its first news conference on July 26. Company President Choi Yong-seok stressed his confidence that the discovered shipwreck, still untouched, is the Donskoi.

As for the rumored treasure: "There's no way for us to figure out whether there would be gold coins or bars on the Donskoi," he said, also noting that if there is gold aboard the wreck it is equally impossible to determine how much.

A scale model of the sunken Russian warship Dmitrii Donskoi is surrounded by the media before a news conference in Seoul, South Korea, on July 26. (AP Photo/Lee Jin-man)   © AP

One more thing: Choi said he had become company president hours earlier, on the very same day he spoke to reporters, because his predecessor and other board members had withdrawn. Choi offered a "sincere apology" for the company's "unverified" claim of 200 tons of gold worth $133 billion possibly being on the ship, saying this possibility was based on "speculative" materials and media reports.

Choi also explained that his company, Seoul-based Shinil Group, has nothing to do with the Shinil Gold cryptocurrency and its promised dividends, which was initiated by the other Shinil Group, based in Singapore.

Yet both Shinil Groups' websites are linked to each other, and Choi admitted that the two entities' shareholders are one another's relatives.

Considering the images of the sunken ship shown at the news conference, Shinil's claim about the discovery of the ship itself could be true. But the act of using the psychology of a treasure hunt to lure investors is nothing but hocus-pocus.

The public is apparently losing its excitement about the discovery of long-lost treasure and replacing it with anger over a possible investment scam.

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