OneCoin

The term “OneCoin” refers to a fake cryptocurrency used as a facade for a fraudulent scheme, which was given the same name after the disclosure. The scheme which was employed is a typical Ponzi scheme, also bearing some resemblance to a multi-level marketing scheme.

The OneCoin fraud is considered to be one of the biggest scams ever carried out, with an estimated sum of nearly $4 billion being received illegally by the fraudsters.

The people behind this scheme were Ruja Ignatova and Sebastian Greenwood. Ignatova and Greenwood have founded two entities, OneCoin Ltd and OneLife Network Ltd, which were created for implementing the scheme into life.

Concept of OneCoin as cryptocurrency

The OneCoin scheme was initiated around the end of 2014, when the launch of a cryptocurrency of the same name was announced. OneCoin was advertised as similar to most other cryptocurrencies, although it’s worth mentioning that OneCoin wasn’t decentralized, being mostly processed on the servers of one of the companies. It was supposed that the cryptocurrency was suitable for making payments, and there was a possibility of mining, available for those who obtain special tokens.

From that point, a significant difference from other cryptocurrencies is clearly visible. The main activity behind OneCoin was selling educational materials on trading and investing, packed into sets of different size and price. All possible actions with the cryptocurrency were available only after buying one of the educational packages, and the more expensive the purchase is, the more activities a buyer gains access to. So, to obtain a token for mining, a buyer had to buy one of the educational course packages. After the investigation began, it was found that most material of the courses was stolen from various sources by other authors.

OneCoin was available for exchange in the inner marketplace called OneCoin Exchange, xcoinx, and that was the only possible way to buy or sell it. Access to the marketplace was provided exclusively to the buyers of the courses, and the possible amount of their activity depended on the amount of money they invested in the educational materials.

In reality, no blockchain technology was presented, as well as the payment system for this cryptocurrency, and OneCoin wasn’t actively traded or used for purchasing.

Brief history of OneCoin

After its launching, the fraudulent activities quickly attracted the attention of some authorities, with the first one being Bulgaria's Financial Supervision Commission, that noticed suspicious financial actions and issued an official warning in 2015 against investing in cryptocurrencies in general, mentioning OneCoin as well.

After that, the financial institutions, media and governmental structures of many European countries took actions against the scheme and its founders, represented as official warnings, bans and prosecutions of several individuals, including Greenwood, Ruja Ignatova, and her brother Konstantin Ignatov. In many statements, the close similarity of the OneCoin business to a pyramid scheme was noted.

In 2017, OneCoin was prohibited in most European countries, and its founders were arrested and put into custody, including Greenwood and Ignatov. Concerning Ruja Ignatova, who disappeared in 2017, she is wanted in many countries by different authorities and agencies.

Fraud indicators of OneCoin

It’s worth studying and analyzing the working principles of such schemes to be able to distinguish a potential swindling activity from an actual investment opportunity. There were a number of questionable features of OneCoin, as well as similarities to well-known fraudulent schemes.

The scheme, used by the OneCoin founders, resembles a Ponzi scheme and a multi-level marketing business at the same time. It didn’t actually require the participants to attract new investors to get the promised profit, although some benefits were provided for doing so. 

Though sometimes an MLM business might operate as a legal one, in case of OneCoin that was used as a means to attract money and new participants only. During the investigation, it was stated that educational courses, which were considered to be the basis of the whole business, were rarely mentioned during the course meetings, and also most of the content was taken from other sources. A limited possibility to use the cryptocurrency also raised questions, as well as a difficult way to cash out and an unclear principle of work, as there was no blockchain model or anything similar.

In about three years (from 2014 to 2017, when the exchange was shut down) the founders of OneCoin manage to raise more than $4 million, which makes it the largest crypto fraud ever carried out. Although there were other instances of scam system in the cryptocurrency sphere, like Bitconnect or GainBitcoin, which also collected large sums of money, the OneCoin fraud is still the most important and influential example of crypto scum fraud systems.