Department of Justice Issues Indictments for 3 Individuals at OneChain For Operating a MultiBillion Dollar Pyramid Scheme
“OneCoin founder remains at large while authorities claim that the company swindled investors out of billions of dollars.”
By Block Society
The United States Department of Justice announced that it has filed charges against multiple members of OneCoin for operating a pyramid scheme that involved billions of dollars. On March 6, 2019 US Marshalls arrested Konstantin Ignatov following an indicted filed in the Southern District Court of New York. Ignatov was charged with wire fraud conspiracy and is currently detained without bail.
An indicted against Ignatov’s sister, Ruja Ignatov, was unsealed on March 7, 2019. Raju Ignatov was the founder of OneCoin, a Bulgarian company opened in 2014 and is charged with wire fraud, securities fraud and money laundering. Authorities have not yet located and arrested Ruja Ignatov.
IRS Special Agent in Charge John R. Tafur, a lead investigator in the case said:
“This is an old scam with a virtual twist. As alleged in court documents, the cryptocurrency OneCoin was established for the sole purpose of defrauding investors. IGNATOV and IGNATOVA allegedly convinced victims to invest in OneCoin based on complete lies about the virtual currency. IRS Criminal Investigation is committed to investigating cryptocurrency scams in an effort to protect the American public and bring cryptocurrency crooks to justice.”
“Between 2014 and 2016, the company generated over $3.7 billion in revenue while continuing to promise investors and OneCoin holders significant profits and returns.”
OneCoin claimed that is had its own private, operational blockchain and cryptocurrency and offered users commissions if they convinced others to buy the coin. Although the company claimed to boast 3 million members and its own ledger, a public ledger was never discovered.
The company continued to lie to its investors and prevented members from cashing out their OneCoin holdings. OneCoin claimed that coins were created through Proof of Work mining. However, OneCoin’s price was adjusted internally, independently of coin circulation and demand.
Ruja Ignatov and other members stated through emails that their intent was to cash out the profits and blame “someone else,” for the missing funds.
By 2015, Ruja Ignatov provided fraudulent OneCoin to individuals to sell in order to increase profits. Between 2014 and 2016, the company generated over $3.7 billion in revenue while continuing to promise investors and OneCoin holders significant profits and returns. OneChain claimed over $2.5 billion in profits between 2014 and 2016, with the majority of the funds received coming from China, transferring profits in to private bank accounts.
The company successfully pumped the price of OneCoin, which was once valued at $0.56. By January 2019, OneChain was worth $33.65.
China previously arrested 98 people in 2018 for their involved with OneCoin, accusing the individuals of participating in a $2 Billion pyramid scheme. Sixteen countries have issued fraud warnings involving OneCoin since 2016.
A third defendant in the case, Mark Scott, is accused of assisting the Ignatov’s in laundering over $400 million.
No information is available involving the likelihood that the accused will be able to return the funds or if victims will be compensated for their losses.
With cryptocurrency scams often leaving victims with limited resources for compensation or recovery, ensure that you speak with your financial planner before investing in digital assets. The extensive amount of profits received in the OneCoin pyramid scheme demonstrates that the potential for similar schemes is high considering the potential payouts involved are extremely lucrative.
The United States Department of Justice. 8 March 2019. Manhattan US Attorney Announces Charges Against Leaders of “OneCoin,” A Multbillion-Dollar Pyramid Scheme Involving the Sale of Fraudulent Cryptococurrnecy. https://www.justice.gov/usao-sdny/pr/manhattan-us-attorney-announces-charges-against-leaders-onecoin-multibillion-dollar
Liao, Shannon. 8 March 2019. The US Arrests Alleged Leader of $3.7 Billion Cryptocurrency Pyramid Scheme. https://www.theverge.com/2019/3/8/18256662/us-onecoin-leader-arrested-cryptocurrency-pyramid-scheme
McKay, Tom. 9 March 2019. DOJ Arrests Chief of OneCoin, Says it was a Multibillion Dollar Pyramid Scheme. https://gizmodo.com/doj-arrests-chief-of-onecoin-says-it-was-multi-billion-1833177338
Zhao, Wolfie. 23 May 2018. China Prosecutes 98 Over Alleged $2 Billion OneCoin Pyramid Scheme. https://www.coindesk.com/china-prosecutes-98-over-alleged-2-billion-onecoin-pyramid-scheme