OneCoin

OneCoin was a cryptocurrency-based Ponzi scheme that was launched in 2014 by Ruja Ignatova, a Bulgarian woman who is now on the FBI’s Most Wanted list. The scam primarily targeted investors by promising high returns with minimal risk, using characteristics of multi-level marketing (MLM) and leveraging the increasing popularity of cryptocurrencies to lure investors. Unsurprisingly, it turned out to be one of the largest crypto frauds in history, with estimates of the fraudulent gains ranging up to $5 billion. This article delves into the inner workings of the OneCoin scam, its development, key players, and the aftermath.

The Genesis of OneCoin

Background

Ruja Ignatova, who holds a PhD in European private law, founded OneCoin Ltd in 2014. Before this, Ignatova was involved in several other dubious ventures, one of which she was convicted for. Along with her husband and father, she had also purchased a company that eventually filed for bankruptcy in Germany under allegations of asset-stripping. These ventures helped her gain both the confidence and the know-how to execute the OneCoin scam.

Concept

OneCoin was pitched as a cryptocurrency similar to Bitcoin, but allegedly more sophisticated and advantageous. It was described as the “next Bitcoin,” and investors were led to believe that it provided an opportunity to get in on the ground floor of a promising digital currency. The company claimed that OneCoin had a high intrinsic value because it was purportedly backed by a blockchain and mining setup similar to Bitcoin.

Structure of the Scheme

The OneCoin scam was complex and multi-faceted, making it difficult for casual observers to see through its layers of deception.

Multi-Level Marketing (MLM)

OneCoin adopted a Multi-Level Marketing (MLM) strategy to expand its reach. This strategy incentivized participants to recruit new members to earn higher returns. Each new recruit had to buy a training package, and the person who recruited them earned a commission. This created a pyramid structure where earnings were dependent on recruiting new investors.

Training Packages

OneCoin sold various “educational” packages priced from 100 euros to 118,000 euros. These packages ostensibly offered educational materials on cryptocurrency trading and included “tokens” which could be used to “mine” OneCoins. The more expensive the package, the more tokens one would receive. However, in reality, the educational materials were often basic and could easily be found for free online.

Non-Existent Blockchain

Despite the claims of having its blockchain, OneCoin did not run on a public ledger. This means there was no transparency in the creation and transaction of coins. Essentially, OneCoin operated from a centralized database managed by the company itself, allowing it to manipulate numbers at will.

No External Exchange

OneCoin was not, and has never been, listed on any external cryptocurrency exchanges. This meant investors could not trade their OneCoins for other cryptocurrencies or fiat money. Instead, the company claimed that members could use the OneCoin Exchange, an internal platform, which later turned out to be largely illiquid.

Key Players

Ruja Ignatova

Ruja was the mastermind behind OneCoin, often referred to as the “Cryptoqueen”. She was the public face of OneCoin, delivering speeches at opulent events and conferences worldwide to gain credibility and attract investors. She disappeared in 2017, just days before a U.S. warrant was issued for her arrest, and remains at large.

Konstantin Ignatov

Ruja’s younger brother, Konstantin, took over operations following her disappearance. He was arrested in March 2019 on charges of wire fraud and money laundering, among others. Konstantin has cooperated with authorities and has provided testimony against other OneCoin associates.

Sebastian Greenwood

Sebastian Greenwood was another key executive within the OneCoin business structure. Partnering with Ruja Ignatova, he played a significant role in marketing and expanding the reach of the OneCoin scam. Sebastian was arrested in November 2018 and faces numerous charges, including conspiracy to commit wire fraud and conspiracy to commit money laundering.

The Aftermath

Various countries have taken actions against OneCoin and its promoters. For instance, India, Italy, China, and Belize have issued warnings or taken actions against the organization. U.S. authorities have been particularly active, with multiple indictments and arrests.

Victims

It is estimated that around 3 million people were defrauded by OneCoin. Many investors lost their life savings, and the scam had a significant socio-economic impact, particularly in developing countries.

Seized Assets

Investigations and legal proceedings have led to the seizure of millions of dollars in assets associated with OneCoin. Authorities are working to return these funds to defrauded investors, although a significant portion of the wealth amassed by the scheme is still unaccounted for.

Conclusion

OneCoin’s case emphasizes the need for increased vigilance and regulatory oversight in the rapidly evolving world of cryptocurrency and investment schemes. The allure of quick, high returns can cloud judgment, but potential investors must conduct thorough due diligence to avoid being victimized by fraudulent schemes. The saga of OneCoin continues to unfold, with national and international authorities still on the hunt for Ruja Ignatova and other key figures involved in the scam.

For more information on Ruja Ignatova and the OneCoin investigation, you can visit the official FBI page dedicated to her here.