The OneCoin scam in the digital currency market is back in the news because of ‘Cryptoqueen’ Ruja Ignatova. The Federal Bureau of Investigation (FBI) has added Ruja Ignatova to its top 10 most wanted list in connection with the OneCoin scam.
The Oxford-educated entrepreneur, Ruja Ignatova is said to have amassed billions secretly and has now disappeared. She cheated investors saying she had created the ‘Bitcoin killer’ but actually moved investors’ billions of dollars in rival company. Her fraud came to light in 2021 through leaked documents from Dubai’s courts.
Read | Indians lost Rs 1,000 crore to fake cryptocurrency exchanges, estimates report
What is OneCoin scam?
OneCoin, promoted as a cryptocurrency was a Ponzi scheme. The company founded in 2014, have offices in Bulgaria called OneCoin Ltd (registered in Dubai) and OneLife Network Ltd (registered in Belize). It was a centralised currency maintained on OneCoin Ltd’s computers rather than a decentralised coin.
OneCoin claimed that its primary line of business was the exchanging of educational materials. They reportedly claimed that servers at two locations in Bulgaria and one location in Hong Kong mine OneCoin.
The only way to exchange OneCoin for any other currency was OneCoin Exchange, xcoinx, an internal marketplace for members who had invested more than just a starter package. OneCoins could be exchanged for euros, which were placed in a virtual wallet from which they could be requested for wire transfer.
The marketplace had daily selling limits based on which packages the seller had invested in, which greatly limited the amount of OneCoins which could be exchanged.
OneCoin abruptly announced on March 1, 2016, that the market would be halted for two weeks for maintenance, citing a large number of miners and the need for ‘improved interaction with blockchain’. The market reopened on March 15, 2016, with no discernible modifications, the majority of transactions expired as before, and daily limitations remained in place.
In January 2017, the exchange was abruptly closed down and the issue came in the purview of regulators worldwide. As per the US prosecutors, the global revenue from the scheme was almost USD 4 billion. While prosecuting 98 individuals, Chinese law enforcement recovered 1.7 billion yuan (USD 267.5 million).
Who are behind the OneCoin scam?
The OneCoin scam was promoted by the 42-year-old Ruja Ignatova who was born in Bulgaria and Sebastian Greenwood. Ruja Ignatova had an illustrious career with a law degree from Oxford and a stint with McKinsey. In 2014, she established OneCoin Ltd and began to market her currency as a ‘Bitcoin killer’.
The operations of the company was spread to many countries around the world. It had more than 3 million investors from over a hundred countries. Investigation reveals that between the fourth quarter of 2014 and third quarter of 2016 alone, OneCoin generated a whopping 3.353 billion euros in sales revenue and earned profits of 2.232 billion euros.
Ruja Ignatova vanished in 2017. Prior to that her brother Konstantin Ignatov took over. The other partner, Greenwood was detained in 2018, while Konstantin Ignatov was detained in March 2019. Konstantin Ignatov admitted guilt to accusations of fraud and money laundering in November 2019. The charges carry a 90-year prison sentence as their ultimate possible punishment.
