Most of you heard about OneCoin and the huge scam it turned out to be. But what is behind it all?
Cryptocurrencies are not regulated by most governments, and in some ways, they won’t ever be able to be regulated as regular companies, banks, and currencies are. All of this makes them the perfect target for a bunch of frauds and scams on people that think they are making good investment choices. One of the famous cases of these frauds is OneCoin, and here is the story behind it!
How It All Started
OneCoin was founded by a Bulgarian Woman called Ruja Ignatova in 2014. The cryptocurrency was owned by the companies OneCoin Ltd. and OneLife Network Ltd. The companies behind it claimed that OneCoin could be mined (With 120 billion available coins) and be sold and used as barter in online transactions. The CEO boldly claimed that this new coin will enable people to make worldwide payments in an instant and make investing and buying things easy and effortless.
The way they explained it is that they won’t make money off the coins themselves but services around it. Like educational material and courses on cryptocurrencies. The courses were designed to be a multi-level marketing scheme often called a pyramid scheme (which by itself is illegal).
The Exchange Marketplace
In order to “streamline” the exchange process for other currencies, they made their OneCoin Exchange xcoinx marketplace. In order to actually use that marketplace members had to buy an access package from OneCoin. Of course, there were selling limits and most of the withdrawal/exchange requests were denied or delayed intentionally by OneCoin. The worst part about it was that this marketplace was the only way you could cash out your OneCoins if you had any.
In 2016 some financial regulators started to question the business practices of OneCoin and they started investigating the company and its cryptocurrency. Some European agencies (from Norway and Hungary) started calling out OneCoin as being a pyramid scheme. Soon the Bulgarian police raided their headquarters and the CEO disappeared and an arrest warrant was issued.
Some of the CEOs’ associates got arrested and pleaded guilty to the charges of money laundering and fraudulent activities.
With over 3.5 million members across the world, this was one of the biggest MLM frauds in history, and by far the biggest one related to crypto. The amount of lost money is still being debated, but estimates range from $4.4 billion up to a whopping $19.4 billion.
All of that money has vanished together with the original founder Ignatova and there is no sight or trace of it ever since.
All of this led to a lot of changes in regulations and awareness of crypto. Most people who got caught up in the scam will probably never touch anything crypto-related ever, and a lot of folks heard about this horror story and are afraid of similar frauds. This is a double-edged sword as it halts further progress and adoption, yet it makes people research more into things that they invest in in the future.