United States prosecutors are bringing criminal charges against the leaders of OneCoin, a cryptocurrency, alleging they were operating a pyramid scheme worth in the multi-billions, when selling the currency.
The accused are the man who runs OneCoin Ltd, Konstantin Ignatov, 33, and his sister Ruja Ignatova, 38, known as the “Cryptoqueen,” according to a report by Reuters.
Ignatov is from Bulgaria and was charged with wire fraud conspiracy. He was arrested on Wednesday (March 6) at LAX.
His older sister Ignatova, also from Bulgaria, was charged with wire fraud, and also securities fraud and conspiracy. She disappeared in October of 2017 and is still at large.
Prosecutors say the two tricked investors by promising huge returns with very low risk. The scheme amounts to fraud, prosecutors say. It worked by getting members, who number around 3 million, to recruit other members to buy cryptocurrency and then receiving commissions for doing so.
Much of the money they received (about $1.2 billion), prosecutors say, was laundered internationally through 21 countries.
The company’s records show a profit of 2.23 billion euros ($2.51 billion) on sales of 3.35 billion euros ($3.77 billion) since the company ended in 2016.
OneCoin “created a multibillion-dollar cryptocurrency company based completely on lies and deceit,” U.S. Attorney Geoffrey Berman in Manhattan said in a statement. “Investors were victimized while the defendants got rich.”
“These defendants executed an old-school pyramid scheme on a new-school platform,” said Manhattan District Attorney Cyrus Vance.
Court documents show that the siblings lied to investors by telling them the value of the coin was based on supply and demand, when really they were setting the value internally.
Ignatova is quoted in the documents as saying “I cheat currently on coins,” and a possible “exit strategy” could be to “take the money and run and blame someone else.”
Ignatov is quoted as telling a OneCoin member in Las Vegas that, “If you are here to cash out leave this room now because you don’t understand what this project is about.”
Another defendant, Mark Scott, 50, a Florida attorney, pleaded not guilty to a charge of trying to launder upwards of $400 million for the company. Scott maintains he was acting a lawyer and did nothing wrong.