OneCoin Scam: Investors duped of $4 billion by "Cryptoqueen" says FBI

OneCoin promised investors a five or even a ten-fold return on their investment and was touted as a "Bitcoin killer". At a mega event held at London's Wembley Arena In June 2016, Ignatova claimed that nobody would talk about Bitcoin in two years. A little over a year later, she disappeared from the scene, just like the money the investors had put into OneCoin.

The Scam

According to the FBI, both Greenwood and Ignatova were well aware that OneCoin was a scam, right from the beginning of their operations. Even as they were working on the concept of cryptocurrency, they referred to it as a "trashy coin" in their emails. Greenwood described their investors as "idiots" and "crazy" in his correspondence with Konstantin Ignatov, brother of Ruja Ignatov, who also became part of the operations.

While cryptocurrencies like Bitcoin are "mined" on data servers, Ignatova and Greenwood were well aware that a piece of software was generating their OneCoin. Although the company showed that the value of the cryptocurrency was being decided based on market demand and supply, the duo was manipulating its price and simulating volatility to build investor confidence. The press release said that the value of the cryptocurrency went from 54 cents to US$32.56 without even decreasing in value.

The Cryptoqueen disappears

To reach a larger number of potential investors, OneCoin also deployed a multi-level marketing strategy where existing investors received commissions for bringing new investors on board. Between quarter four of 2014 and 2016, investors pooled more than $4 billion into OneCoin-controlled bank accounts to buy OneCoin packages.

Unlike other cryptocurrencies that put the record of their transactions in a public ledger called the blockchain, OneCoin never really had one. They maintained only a private ledger of transactions and later began allocating OneCoin that did not exist.

The facade came crashing down when investors tried to sell their OneCoin, and news spread that the entire operation was a scam. Investigators secured a warrant against the "Cryptoqueen" in October 2017 on counts of wire fraud, securities fraud, and conspiracy to commit money laundering.

According to the FBI, Ignatova, as early as 2014, had discussed with Greenwood an "exit strategy" for OneCoin, where she would take the money and run. On October 25, 2017, she boarded a commercial flight from Sofia, Bulgaria, to Athens, Greece but disappeared from there.

Greenwood was arrested in July 2018 and will be sentenced in April, while Konstantin Ignatov was arrested in March 2019. Both men have pleaded guilty to charges levied, with the latter scheduled to be sentenced in February this year.