An international pyramid scheme involving the marketing of the cryptocurrency OneCoin has now been revealed. Konstantin Ignatov, his sister Ruja Ignatova and Mark Scott have been charged by the Southern District of New York (SDNY) for wire fraud conspiracy, securities fraud, and money laundering.
OneCoin is a Bulgarian-based company that was founded in 2014 and is still active today. The company’s main operations depended upon selling educational cryptocurrency trading packages to its members, who in turn receive commissions for recruiting others to purchase these packages. SDNY has identified this as a multi-level marketing structure and attributes that to the rapid growth of the OneCoin member network. The company claims to have more than 3 million members worldwide.
In a government press release, Manhattan attorney Geoffrey Berman said that the OneCoin leaders essentially created a multi-billion dollar company “based completely on lies and deceit.”
Leaders of OneCoin were furthermore alleged to have lied to investors to inflate the value of a OneCoin from approximately $0.50 to over $30.00. This was just one facet of a breadth of misinformation perpetrated by the leaders of the company, including claims about how how OneCoin cryptocurrency is mined by company servers, when in reality OneCoins are not mined with computer resources and the use of a private blockchain, which was found to be false in the investigation.
So how damaging was this scheme? The SDNY claims that between 2014-2016 alone, OneCoin was able to generate more than $3.7 billion in sales revenue and earned profits of approximately $2.6 billion. The investigation revealed that Ignatova and her co-founder created the business with the full intent of using it to defraud investors. In one email that was found between OneCoin’s co-founders, Ignatova described her exit strategy for OneCoin, which was simple to take the money and run and to blame someone else.
Konstantin Ignatov was arrested on March 6, 2019 at LAX, while his sister remains still at large. It is estimated that Ruja Ignatova could see up to 85 years in prison if she is found guilty on all accounts, as she faces five separate charges. Mark Scott was arrested in Massachusetts on Sept. 5, 2018 and faces 20 years in prison.
Many authorities across the globe have been notified of OneCoin’s fraudulent behaviours and have attempted to stop the company’s operations.
This article was written by Kristina Weber of Centry Global. For more content like this, be sure to subscribe to Centry Blog for bi-weekly articles related to the security and risk industries. Follow us on Twitter @CentryGlobal!