The two siblings behind OneCoin, an alleged cryptocurrency-based worldwide pyramid scheme worth billions of dollars, have been charged by American prosecutors with fraud and money laundering, though one of the suspects remains at large.
Konstantin Ignatov was arrested at Los Angeles International Airport “on a wire fraud conspiracy charge stemming from his role as the leader of an international pyramid scheme that involved the marketing of a fraudulent cryptocurrency called OneCoin”, said Geoffrey S Berman, US Attorney for the southern district of New York.
Ignatov’s sister Ruja, the alleged founder and head of OneCoin, was charged in absentia for wire fraud, securities fraud and money laundering. She has not been seen since October 2017.
Founded in the Bulgarian capital of Sofia in 2014, OneCoin drew in investors from numerous countries, who reportedly put more than US$4 billion into the scheme. US Internal Revenue Service Special Agent John R Tafur described OneCoin as “an old scam with a virtual twist”, while FBI Assistant Director-in-Charge William Sweeney Jr said that OneCoin never had any real value.
“Whether you’re dealing with virtual currency or cold, hard cash, we urge the public to exercise due diligence with any investment,” said Sweeney.
OneCoin Ltd continues to operate as a multi-level marketing network. In the period from the fourth quarter of 2014 to the third quarter of 2016 alone the scam generated €3.353 billion (US$3,768 billion) in sales revenue and earned “profits” of €2.232 billion (US$2.508 billion).
Global money laundering allegations
Ignatov was reportedly in Las Vegas in late February and early March for a meeting with a number of OneCoin affiliates, telling members of the scheme that “if you are here to cash out, leave this room now, because you don’t understand what this project is about”.
A third suspect, Mark Scott, was arrested in September and accused of helping to launder more than $400 million, reportedly through bank accounts at investment funds and financial institutions in locations that included the Cayman Islands and the Republic of Ireland.
According to the US Department of Justice, Ruja Ignatova has been charged with one count each of wire fraud, conspiracy to commit wire fraud, securities fraud and conspiracy to commit money laundering, each of which carries a maximum jail sentence of 20 years. She was also charged with one count of conspiracy to commit securities fraud, which carries a maximum prison sentence of five years.
Her brother is charged with one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison. Scott is charged by indictment with one count of conspiracy to commit money laundering, which carries a maximum jail sentence of 20 years.
“As alleged, these defendants created a multibillion-dollar ‘cryptocurrency’ company based completely on lies and deceit,” said Berman. OneCoin, he said, had “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,” he added.