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OneCoin cryptocurrency executive arrested for 'multibillion-dollar' fraud

By Cal Jeffrey · 19 replies
Mar 11, 2019
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  1. Konstantin Ignatov was arrested March 6 at the Los Angeles International Airport on a wire fraud charge for his role in operating a fake cryptocurrency called OneCoin. If found guilty he could face up to 20 years in prison.

    Mark Scott, a former partner of a “major US law firm,” was arrested the day before charged with one count of conspiracy to commit money laundering. This charge also carries a maximum 20-year sentence.

    On March 7 the US Attorney for the Southern District of New York Geoffrey Berman unsealed an indictment of Ignatov’s older sister Ruja Ignatova. She is charged with wire fraud, conspiracy to commit wire fraud, securities fraud, and conspiracy to commit money laundering, each carrying a maximum sentence of 20 years. She is also charged with one count of conspiracy to commit securities fraud, which could tack on another five years in prison if convicted. Ignatova is currently in hiding.

    "These defendants executed an old-school pyramid scheme on a new-school platform, compromising the integrity of New York’s financial system and defrauding investors out of billions."

    According to the US Department of Justice, Ruja Ignatova co-founded OneCoin Ltd in 2014. She ran the company from its headquarters in Sofia, Bulgaria until October 2017 when she disappeared from public view. Her brother took over the top seat of the firm around the middle of 2018.

    The company operated as a multi-level marketing scheme where members would get a commission for selling OneCoin investment packages. OneCoin claims over three million members and is still in operation, says the DoJ.

    Between Q4 2014 and Q3 2016, the scam generated over €3.353 billion ($3.8 billion) in revenues and made around €2.2 billion ($2.5 billion) in profit.

    OneCoin claimed to have a “private blockchain.” However, investigators found no evidence that this was true. The company has been issuing “fake coins” since March 2015.

    "They promised big returns and minimal risk, but, as alleged, this business was a pyramid scheme based on smoke and mirrors more than zeroes and ones. Investors were victimized while the defendants got rich."

    Konstantin Ignatov attended a meeting with OneCoin members in Las Vegas earlier this month. He was asked at the beginning of the conference about how members could monetize their investments.

    “If you are here to cash out, leave this room now because you don’t understand what this project is about,” he reportedly answered.

    In a prepared statement, Federal Bureau of Investigation Assistant Director-in-Charge William Sweeney, Jr. warned investors to do their homework before laying down money.

    “As we allege, OneCoin was a cryptocurrency existing only in the minds of its creators and their co-conspirators. Unlike authentic cryptocurrencies, which maintain records of their investors’ transaction history, OneCoin had no real value. It offered investors no method of tracing their money, and it could not be used to purchase anything. In fact, the only ones who stood to benefit from its existence were its founders and co-conspirators. Whether you’re dealing with virtual currency or cold, hard cash, we urge the public to exercise due diligence with any investment.”

    Anyone who believes they may have been a victim of OneCoin or has any information that would be helpful in the case is urged to contact the US Department of Justice. Contact information can be found in the US Attorney’s press release.

    Permalink to story.

  2. VitalyT

    VitalyT Russ-Puss Posts: 4,407   +2,954

    Aren't all crypto-currencies financial pyramids?
    JaredTheDragon and Dimitrios like this.
  3. OutlawCecil

    OutlawCecil TS Guru Posts: 657   +469

    Um... no. Cryptocurrencies are more like stocks. They're worth what people are willing to pay for them. This means it can go up or down. How is that a pyramid?
  4. VitalyT

    VitalyT Russ-Puss Posts: 4,407   +2,954

    That's a meaningless way of looking at worth. In the same manner you can say that any financial pyramid is good for as long as it doesn't collapse. But they all do in the long run, same as crypto-currencies. People will always abandon it in the end, once they fully understand that it represents nothing, and thus has true value of zero.
  5. Uncle Al

    Uncle Al TS Evangelist Posts: 5,287   +3,701

    Another one bites the dust!
    Clamyboy74 and trparky like this.
  6. OutlawCecil

    OutlawCecil TS Guru Posts: 657   +469

    Your contradicting yourself once again. How much is a $5 bill worth? If you say 0, maybe should all just shred our paper cash since it's worthless. If you say it's worth $5 then you are proving my point. We all agreed a piece of paper is worth that, hence, it is worth that.
    m4a4 likes this.
  7. m4a4

    m4a4 TS Evangelist Posts: 1,428   +993

    ...You do realize that technically nothing has value, unless people want it. So don't BS us that another form of currency represents nothing because you don't like it.
    takemaru likes this.
  8. Rippleman

    Rippleman TS Evangelist Posts: 871   +393

    Note: you will most likely hate me for saying this, but if I could come up with a scam that would net me even just $1,000,000 I too would simply disappear. No second thoughts at all.
  9. QuantumPhysics

    QuantumPhysics TS Evangelist Posts: 1,178   +856

    All Cryptocurrency is a Ponzi Scheme.

    Good Job...now lock up the rest of them.
    JaredTheDragon, Dimitrios and VitalyT like this.
  10. Dimitrios

    Dimitrios TS Guru Posts: 439   +316

    The day I can use it as money 100% like fill up my gas tank, pay my bills, buy any food/drink I will take it seriously, for now it's just Monopoly money.

    Funny part is by theory as long as people play monopoly, that fake money only works in that game/world. The monopoly money relies on that game and it's users............................................ Question is do you try and bring in people to that board game and make the user base larger or do you try and take that money and try and adapt it to another game?
    Rippleman likes this.
  11. BSim500

    BSim500 TS Evangelist Posts: 602   +1,211

    They're not a classical pyramid scheme (more a "pump and dump" penny stock fraud), but they are just as unsustainable in different ways:-

    Theory - "Crypto-currencies are da future man. Fiat can be over-printed, but you can't over-print Bitcoin! They'll last 1000x longer! Plus Bitcoin is a PEOPLE's currency not in the hands of a few"

    Reality - "After a mere 11 years, people are deserting Bitcoin in droves because it no longer functions as a get rich quick scheme (which, organized crime aside, is the only real reason non-geeks were drawn to it). Plus almost 90% of Bitcoins ever mined are owned by just 0.5% of Bitcoin wallets and over 60% of Bitcoins are owned by just 0.07 percent of wallets making it even more centralized and 'elitist' than fiat. Because we can't print 1000x more Bitcoins, instead we'll just create 1,000x alternative Bitcoin-like currencies. Then when the get-rich-quickness of those get exhausted by 2030, we'll just create 10,000x more alternative crypto-currencies, then when they get exhausted by 2050, we'll just create..."

    It's like watching someone boast they've clamped down on junk mail by designing a letter-box that forcibly limits word count of any junk mail passing through it to just 10 words. So instead of 1x piece of junk mail (USD) that inflates from 10 words to 1000 words gradually over a century, instead you now get 100x 10 word junk mails through the letter-box instead of just one in the space of a decade...
    captaincranky and takemaru like this.
  12. captaincranky

    captaincranky TechSpot Addict Posts: 14,818   +3,910

    Well, as much as I hate to use Tesla as an example, it goes like this. If you buy a share of Tesla stock, you own a small piece of the Tesla corporation.

    If you buy a Bitcoin, you own a piece of Jack squat.
    VitalyT and Dimitrios like this.
  13. MaikuTech

    MaikuTech TS Evangelist Posts: 1,062   +186

    Unplug the electricity from crypto currencies and its right back to old "physical" paper metal related like money since the stone age.
    Dimitrios likes this.
  14. OutlawCecil

    OutlawCecil TS Guru Posts: 657   +469

    You are correct there. But then again, your example still works... If you buy stock in a company and it goes under, you own squat. It's still only worth what people are willing to pay.

    Whether it's a company, product, or a platform (cryptocurrency), you are investing in the overall idea. If the idea tanks, everybody loses everything.

    There. is. no. difference.
    Last edited: Mar 12, 2019
    takemaru and JaredTheDragon like this.
  15. Dimitrios

    Dimitrios TS Guru Posts: 439   +316

    lol Your comment made me think of this instantly. jack-squat.
    captaincranky likes this.
  16. captaincranky

    captaincranky TechSpot Addict Posts: 14,818   +3,910

    Owning stock in AT & T, is a far different thing from sinking you money into some sh!t crypto which was "offered", the day before yesterday.

    You can keep altering the facts of different circumstances to suit your beliefs, agenda, or arguments.

    At the end of the day, if you think investing in a major, functioning, corporation is the same as buying a string of numbers on a god knows where computer, you should likely seek treatment for a delusional disorder.
    Last edited: Mar 12, 2019
    Dimitrios likes this.
  17. captaincranky

    captaincranky TechSpot Addict Posts: 14,818   +3,910

    I remember that from SNL..(y) (Y)
    Dimitrios likes this.
  18. MaikuTech

    MaikuTech TS Evangelist Posts: 1,062   +186

    Heh, sadly but surely it'll happen, I'm glad I never got into crypto currencies anyway. :)
  19. OutlawCecil

    OutlawCecil TS Guru Posts: 657   +469

    yes, investing in well known companies is a safer bet than investing in new unknown companies the same way investing in Bitcoin is a safer bet than investing in some brand new cryptocurrency somebody just made. (y) (Y)
  20. takemaru

    takemaru TS Member Posts: 17

    Well, it never even existed.

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