The 15 Billion Dollar Crypto Heist and the Hunt for the Missing Cryptoqueen
OneCoin cryptocurrency company scam ponzi and pyramid scheme investigation

The 15 Billion Dollar Crypto Heist and the Hunt for the Missing Cryptoqueen

By Zirbo | Zirbo | 8 Dec 2020


During the early days of the cryptocurrency revolution before the big boom of 2017, things were a lot more uncertain than they are today. People didn't know what technologies like blockchain were and what currencies were legitimate projects. Very few people understood the underlying technology behind cryptocurrencies.

This created a lot of opportunity, but also a lot of risk. People from all over the world didn't want to miss out on this once in a lifetime chance. Unsurprisingly this environment was perfect for scams to thrive in. A famous example being Bitconnect, which became the inspiration for tons of memes after it collapsed.

But the largest crypto scam that ever happened, is one that you might not even have heard of!

Onecoin, the $15 billion dollar cryptocurrency scam.

b23b9649c93a11d6eba4d0254dc2774e29c83136603b7a96e606904c82bcd47d.jpeg

How did this get started?

It all starts with Ruja Ignatova. Ruja was born in Sofia, the capital of Bulgaria. At the age of 10 she moved with her family to Germany, and in 2005 she graduated with a Phd in private law from Konstanz University. She also has a degree from Oxford, and she worked for a short time for the McKinsey group, which is a famous global consulting company.

391445f2269fa0145daf4ccb5e205cde9f64511ea755a40f9c87d0f0db9909f7.jpeg

In 2012 she had her first brush with the law. She was convicted of fraud in Germany in connection with her father's purchase of a company that was later declared bankrupt under suspicious circumstances. She was given a 14 month suspended sentence for this.

In 2013 she was involved with a multi-level marketing scam called BigCoin.

And In late 2014 she founed OneCoin.

Already here are some red flags from the founder herself.

How did OneCoin operate?

OneCoin operated under a multi-level marketing model (MLM). In a system like this, people sell a certain product, but they also try to sign up others to sell the same products. As a recruiter you earn commissions from your recruits, on top of the products that you sell. This type of business is very controversial, but not illegal. Some companies have been able to do it sustainably like Herbalife and Amway, but have faced heavy criticism for it and many lawsuits.

The problem with OneCoin is that there isn't an actual product to sell, just the cryptocurrency, so the model would eventually become unsustainable. In a case like this the program becomes a ponzi or pyramid scheme, which are nothing more than scams.

eaf46dec9a5e4d75b6f10e683b260a6b7100e050f6794a1d544afb22c38bec0d.jpeg

The OneCoin system basically works like this:

-You buy a OneCoin package from their website.

-You then get your friends and family to buy as well.

-You earn a certain percentage from the sales of these packages that your friends and family buy, and if they recruit others you will earn even more.

-This process keeps on repeating as people keep being referred.

Of course OneCoin itself would be earning the most from this as they are at the top of the pyramid.

These packages that people bought contained educational materials (that were plagiarized) and OneCoin tokens that gave members the ability to mine more.

It is believed the reason they included the educational material was so they could claim later that thay they didn't sell you a scam, but education from an educational company. Interestingly the word OneCoin never appears in the material.

b2386db44d9b319a39e209877a099e45987032f5f300913e231e689a7589a67c.png

The company did have an exchange in place where people could exchange their OneCoins for fiat, but members could only sell a very limited amount, to prevent people from cashing out. People were promised that OneCoin was developing their own exchange where people could trade their OneCoin for fiat on the open market.

Ruja would travel across the world from seminars, to conferences, and events, to promote OneCoin. They would create extravagant productions where the charismatic Dr. Ruja would talk about the future potential of OneCoin, and how it would be a "Bitcoin killer". These flashy events were designed to lure in new investors  and make the company look legitimate.

33fa17edb29bc9b00a62fc679ff813c362a0c28546c398958139ae4626ec690b.jpeg

At one point she claimed that OneCoin had over 2 million users and a market capitalisation of $4.5 billion, just under Bitcoin at the time.

Ruja was considered to be very intelligent, and used her degrees and experience working at the Mckinsey group to gain people's trust. She would use typical crypto talking points such as freeing yourself from the banks and democratizing finance, to convince people they were a real cryptocurrency. A message that resonated with people after the 2008 financial crisis.

Videos like this that look like any other crypto project were used to convince people of the utilities of OneCoin.

They would also use more deceptive ways of scamming people, such as taking out a full page ad in Forbes magazine, but pretend it was the actual cover of the magazine! The magazine would be folded to the page with the ad, so it seemed like it was the front.

712aa3fc4be38a14c860e9881760ae7da58b165b95a1dd90cf505e8af3fed5e0.jpeg

People that bought into OneCoin packages were entered into an exclusive club called OneLife. Each area had its own community leader that would contact people over social media to continue promoting OneCoin and keep users up to date on the latest developments.

0c09526262d6ff26116715e07d5cc262acc994b7cc8affa2f830cbd9121c6d02.jpeg

But in reality this club was designed to prevent people from seeking information about OneCoin from other sources. OneCoin didn't want people to find out the real truth behind the company and start doubting them. People who were part of OneLife were told not to listen to the doubters and haters, they created an us vs them metality among the members. Some of their behavior seemed almost cult like, like a secret hand symbol for when they met each other in real life.

OneCoin was extremely successful as a scam, it just kept on growing with more and more people pouring their money in as time went on. Between August 2014 and March 2017 more than €4bn was invested from dozens of countries!

403321dcd339c39451964ceea81b6854b5b548a5a18a4448bd1f32ea664ad5df.png

Despite their success investors were growing concerned that the long promised exchange kept being delayed. This was supposed to be adressed at a large event for OneCoin promoters in Lisbon in October 2017.

But then the day came, and Ruja never showed up.

"She was on her way. Nobody knew why she wasn't there," said one of the delegates. Calls and messages were not being answered, and even the head office in Sofia, had no idea where she was.

There were many conspiracy theories about her being kidnapped, or even killed by the banks that wanted to stop her "cryptocurrency revolution". But as you can see from the timing it's much more likely that she realized that the game was up.

She had gone underground. According to FBI records, just two weeks after skipping the Lisbon conference, she boarded a Ryanair flight from Sofia to Athens. That was the last time anyone ever saw or heard from Ruja, and earned her the nickname of the missing cryptoqueen.

Afterwards her brother Konstantin Ignatov takes over from her, and keeps the scam going. Ruja is tried in absentia for wire fraud, securities fraud, and money laundering.

5d2318a3201495e3a316c93691cdfcdfecfd0f175a59c190ef06ec2a59e6b786.jpeg

Konstantin was Ruja's bodyguard and assistant, before her dissapearance. But it doesn't take long for Konstantin to get in trouble as well. On March 6th 2019 he is arrested by FBI agents as he is trying to board a flight from Los Angeles back to Bulgaria. He is charged with fraud in connection to the OneCoin scam, and according to the US Department of Justice, there is a link between Konstantin and "significant players in Eastern European organized crime." He is still awaiting sentencing today.

Many others involved with the scheme are arrested as well, with charges ranging from fraud to money laundering. Others are still on the run today.

But surprisingly the scam is still continuing! Even after all this, the main office in Bulgaria still hasn't been shut down and people are still working there. The company denies that they are a scam, even though their website has been taken down. One website still exists that allows people to log-in, but not to invest or create a new account.

1b6fb3842709202e04372ed471f5f8da31661ba9c54fafbedb8d76a742604617.png

The downfall of OneCoin

OneCoin's biggest secret was gradually revealed over time, there wasn't even a blockchain to begin with! The cryptocurrency was 100% fake.

Blockchain expert Bjorn Bjercke was approached in October 2016 by a recruiter for a job as chief technical officer at a cryptocurrency start-up.

5897b2ffe51a52e44a83f9b7b5a56c9d9d79acfbc2f22cfc5f26c84ff5927a8f.jpeg

"I was thinking: "What is my job going to be? What are the things that I'm going to have to do for this company?" he said in an interview with the BBC.

The recuiter told him: "Well, first of all, they need a blockchain. They don't have a blockchain today."

Bjorn responded with "What? You told me it was a cryptocurrency company."

The recruiter said this was correct and they had been operating for a while, but didn't have a blockchain. Bjorn asked the company's name and the recruiter told him it was OneCoin.

Another instance is when Jen McAdam was approached online by people who claimed that OneCoin was a scam. At first she didn't want to believe any of it, but after doing her research with the help of others, she started asking questions at OneCoin.

1d79f2b703f37961f89558c2a7e9aaa67b236aacaa1bb41ca44cf0144b62d7f5.jpeg

After going back and forth for a long time, she finally received a voicemail in April 2017 with this message: "Ok Jen… they don't want to disclose that kind of information, just in case something goes wrong where the blockchain is being held. And plus, as an application, it doesn't need a server behind it. So it's our blockchain technology, a SQL server with a database."

An SQL server is not a basis for genuine cryptocurrency. The manager of the database could go in and change it whenever they wanted. The rising numbers that investors were seeing in their accounts, were just numbers typed in by a OneCoin employee.

Jen together with her friends and family had invested 250.000 Euros, after Jen watched an online webinar. She was convinced after seeing Ruja's background and education. At the webinar they showed a speech Ruja had given at a conference hoster by The Economist magazine, and that was what clinched the deal for her. She did not want to miss out on this once in a lifetime crypto opportunity.

ce405f4403b74ea38cdebc7ec433da95f02f62a884cf4547bfe7edfde8d9c352.jpeg

But even after the blockchain secret came out it didn't change much at first. Most people back then simply didn't know what a blockchain was.

Cracks in system

You might be wondering, why didn't law enforcement do more to stop this?

Well one answer is that governments back then knew almost nothing about cryptocurrency. Law enforcement was slow to act, because there weren't any laws or regulations for cryptocurrency yet.

But cracks in the scheme did appear already early on.

On September 30th 2015, Bulgaria's Financial Supervision Commission issued a warning of potential risks in new cryptocurrencies, using OneCoin as an example. After the warning OneCoin moved its banking operations to banks in Belize and the UAE.

In 2016 many countries in Europe started warning people that OneCoin is a pyramid scheme and shouldn't be trusted, with Italy investigating them and then finally banning the company in early 2017. In China, several members and investors of OneCoin were arrested and US$30.8 million of assets were seized

On 23 April 2017, Indian police arrested 18 people in Mumbai for organizing a OneCoin recruitment event. The police attended the event undercover before they decided to act. They recovered $6.9 million and $10.65 million was transfered out before they could seize it.

On 16 June 2017, the CEO of OneCoin Ltd. claimed OneCoin was licensed by the Vietnamese government, and that it was legal to use them as a digital currency. This was a lie and the Vietnamese government quickly denied all of this.

On 17 and 18 January 2018, Bulgarian police raid OneCoin's offices in Sofia. German police and Europol are involved as well. Also 14 other companies linked to OneCoin are investigated and 50 witnesses are questioned. OneCoin's servers and other material evidence were seized.

806ba75d84b66737196af20cf653dff6c89cb7e91d62432d0d70373fe31f7a7b.jpeg

So as you can see from this timeline of events, many people were already warning against using OneCoin early on, with prosecutions and investigations starting after Ruja's disappearance.

The Heist

It's hard to know exactly how much money has been invested into OneCoin, estimates range from €4 billion to as high as €15 billion! The reason it is so hard to find the exact amount is because the funds are spread through a large network of shell companies and hidden bank acounts.

OneCoin's corporate structure was extremely complicated. For example when Ruja bought a large property in Sofia, the money came from OneProperty. That company was owned by Risk Ltd. Risk Ltd was managed by a company called Peragon, and Pergagon was owned by another company, Artefix. That company was owned by Ruja's mother before being sold to an unknown man.

People connected to OneCoin spoke of "shadowy groups" and "mysterious people" that they didn't want to name. Even Bjorn Bjercke received received death threats from people.

He said had he known that this would happen, he would have never revealed that OneCoin didn't have a blockchain. When asked to elaborate on the death threats he said this: "I can't discuss that. It starts to get very very very scary, very very very fast."

Bjorn also said that according to people involved with OneCoin at the early stages, that Ruja never expected it to grow so fast and big. It was never supposed to be a billion dollar scam, and that she tried to close it down at some point, but the dark forces involved wouldn't allow her to do that.

One of the sellers in OneCoin's MLM network, Igor Alberts also said that "very influential people" were involved. When asked for more details he said this: "No, I cannot tell that because I don't want to take that risk with our lives."

Conclusion

In some countries law enforcement have been able to recover some of the funds from OneCoin, but most of it remains missing. Former employees of OneCoin are still involved in many ongoing lawsuits as victims try to claim back their money.

Ruja still remains missing, and there are many theories as to what may have happened to her. From powerful people protecting her, all the way to plastic surgery to hide her identity.

BBC journalists attempted to track her down with the help of a private investigator. The invesigator turned up some clues that she might still be in Greece, where several waiters at high end restaurants recognized her from photos.

Ruja also had a daughter in 2016 who lives in Frankfurt with her ex-husband. The husband did not want to talk to the BBC, but according to a trusted source Ruja does spend most of her time in Germany.

But other than these leads, the trail goes cold.

She has been able to hide successfully for years now, so she most likely has changed her appearance to some degree and aquired a new identity or identities. I'm sure though that one day she will most likely make a mistake and get caught.

 

That is the whole story of OneCoin and how the cryptoqueen scammed the world. Thanks for reading and I hope you have enjoyed this article!

How do you rate this article?


84

0

Zirbo
Zirbo

I'm interested in anything crypto and I want to help people explore cryptocurrency!


Zirbo
Zirbo

I'm a bit of a crypto nerd. If that sounds good to you, then you'll enjoy my articles!

Send a $0.01 microtip in crypto to the author, and earn yourself as you read!

20% to author / 80% to me.
We pay the tips from our rewards pool.