OneCoin: Authorities Arrest Alleged Leader of $3.7 Billion Crypto Pyramid Scheme

  • Bulgaria=based OneCoin project's developers have been arrested for their alleged involvement in a fraudulent crypto-related scheme.
  • The arrests reportedly took place on March 6th in Los Angeles, California.

The leaders of “OneCoin” have been arrested and charged by the US District Attorney for allegedly promoting a fraudulent cryptocurrency-related pyramid scheme.

According to a notice published on March 8 by the US Attorney Office of the Southern District of New York (SDNY), Mark Scott and Konstantin Ignatov, who are the founders of OneCoin, were taken into police custody on March 6, 2019 in Los Angeles, California.

Scott, Ignatov, and Ruja Ignatova (also a OneCoin founder who remains at large) are suspected of being involved in “wire fraud, securities fraud, and money laundering offenses,” through which they lured unsuspecting investors into contributing “billions of dollars in the fraudulent cryptocurrency.”

Claiming To Have 3 Million Members

Founded in 2014 and headquartered in Sofia, Bulgaria, the developers of OneCoin had allegedly been running a pyramid scheme type marketing campaign. This is said to have involved encouraging people to ask potential investors to purchase various cryptocurrency investment packages offered by OneCoin’s founders. Notably, the OneCoin team claims they have more than 3 million members worldwide.

During a meeting in Las Vegas, investors asked Ignatov when they would be able to “cash out” their coins and make a profit. In response, Ignatov reportedly said that “if you are here to cash out, leave this room now, because you don’t understand what this project is about.”

"Promising" Huge Returns

Geoffrey S. Berman, a Manhattan US Attorney assigned to the case, noted: 

As alleged, these defendants created a multibillion-dollar ‘cryptocurrency’ company based completely on lies and deceit. 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. Our Office has a history of successfully targeting, arresting, and convicting financial fraudsters, and this case is no different.

Between the last quarter of 2014 and the third quarter of 2016, the creators of OneCoin reportedly managed to generate approximately $3.769 billion in total revenue from sales - while also making “profits” of around $2.509 billion. Commenting on the matter, Cyrus R. Vance, Jr., a New York County District Attorney, remarked: “These defendants [the Ignatovs] 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.”

Making False Claims Regarding OneCoin

Moreover, the SDNY revealed that Ignatov, Ignatova, and several other OneCoin members made false claims regarding seemingly lucrative crypto investment schemes. These included providing false information to investors such as “the OneCoin cryptocurrency is mined using mining servers maintained and operated by the company.”

However, officials investigating the matter have reported that the OneCoin cryptocurrency is not mined using computing resources. Notably, OneCoin members had also claimed they were running a private blockchain network, but investigators reportedly learned “that OneCoin lacks a true blockchain.”

Other details reported by investigators include Ignatov making false claims that OneCoin’s management was planning to conduct an initial public offering (IPO) in order to “generate excitement and solicit additional investments from member victims.”

Binance Raises Eyebrows After Confirming Coinmarketcap Acquisition

Binance Holdings Ltd., the firm behind leading cryptocurrency exchange Binance, has confirmed the acquisition of cryptoasset tracking platform CoinMarketCap.

In a blog post, Binance confirmed the acquisition and claimed CoinMaketCap “stays committed” to providing quality cryptocurrency data to its users “while benefiting from Binance’s expertise, resources and scale.” It added CoinMarketCap has “maintained independence from external stakeholders since its inception” and will keep being an independent business entity.

In the post, Binance CEO Changpeng Zhao was quoted as saying CoinMarketCap is the “landing page of crypto.” The acquisition was first reported on by TheBlock, which wrote the platform could be changing hands for as much as $400 million in cash and stock.

While Binance’s BNB token and the Binance exchange are listed on the platform, the post responded to users’ concerns surrounding the acquisition writing:

CoinMarketCap and Binance are separate entities that maintain a strict policy of independence from one another: Binance has no bearing on CoinMarketCap rankings, while CoinMarketCap has no influence over Binance’s operations.

As CryptoGlobe reported, users expressed concern surrounding CoinMarketCap’s data after the acquisition was first reported, as managing the platform could be very beneficial for Binance, which could use it as a funnel to gain new users.

Speaking to Bloomberg News Nic Carter, co-founder of Coin Metrics, noted that Binance could also set its platform as the preferred exchange by topping the rankings by default.  Carter added:

While the move may cause some to question CMC’s [CoinMarketCap’s] ability to remain a neutral data provider, it could potentially be very productive for Binance.

Binance’s blog post details CoinMarketCap’s founder Brandon Chez is stepping down as CEO to focus on his family, while current Chief Strategy Officer Carylyne Chain has been named interim CEO.

The cryptocurrency exchange recently raised users’ ire after participating in what was dubbed a hostile takeover of the STEEM blockchain, later on removing the vote. CoinMarketCap’s data itself has also been heavily criticized, with one filing with the Securities and Exchange Commission from Bitwise Asset Management arguing 95% of the trading volume it reports is fake or non-economical in nature.

Cryptocurrency exchanges have been known to use schemes that help boost their trading volumes – in some cases allegedly going as far as wash trading – to boost their rankings on CoinMarketCap and gain visibility.

Addressing the issue Zhao noted it wasn’t an easy problem to fix, adding that almost everything “requires some kind of judgement or algorithm.” While the acquisition comes at a time in which the economy has been suffering because of the COVID-19 outbreak.

Market volatility has, however, been good for crypto exchanges. Zhao revealed Binance’s traffic increased about five times over the past few weeks, while Coinbase had already revealed its volumes grew after the March 12-13 market crash.

Featured image by David McBee from Pexels