SEOUL, SOUTH KOREA - Police said Wednesday they have busted South Korea's biggest-ever 'pyramid' financial scam involving nearly 2.6 billion dollars collected from tens of thousands of investors.

They said they are hunting 14 swindlers, including Cho Hee-Pal who is accused of raising about 3.9 trillion won (S$3.9 billion) from more than 30,000 investors.

Cho, 51, established a company called BMC in 2004 to lease medical devices to hospitals, bathhouses and beauty salons and recruited investors the way multi-level merchandising firms do.

He and other suspects fled early this month when police launched an investigation in two cities, Daegu and Daejeon.

'This is the country's largest pyramid fraud case. The amount of money involved and the number of victims have been swelling,' Kwon Duk-Eon, a police spokesman in Daejeon, told AFP.

'Many investors may not retrieve their money because it's hard for investigators to track the bank accounts of Cho's group,' he said.

Police said Cho's company lured investors, mostly middle-aged or elderly women with scant financial knowledge, with the promise of high returns. Many reinvested their dividends in the company.

Police arrested the company's vice chief Monday, and charged 103 employees without ordering their detention.

'I lost 200 million won, including 80 million won I saved over the last 20 years and 120 million won borrowed from five relatives,' an unidentified woman in Daegu told the JoongAng Daily.

'An acquaintance urged me to invest in the firm last February, claiming a return of 32 percent in eight months through the business of leasing medical instruments,' she added.

A pyramid scheme is a non-sustainable business model that involves the exchange of money primarily for enrolling other people into the scheme, without any product or service being delivered.

They are illegal in South Korea and many other countries.