OneCoin’s fallout lingers as US victims get a shot at recovery

Investors in the cryptocurrency Ponzi scheme OneCoin may finally get some relief through a Department of Justice program, some 12 years after the project launched.

In the United States, victims of the $4 billion crypto Ponzi scam OneCoin are finally receiving compensation. 

On April 13, the US Department of Justice said that $40 million in assets are available to anyone who purchased OneCoin between 2014 and 2019 and experienced a net loss.

This program marks a milestone for OneCoin victims, most of whom had no recourse to get back what they lost, until now. Victims in the UK attempted a class action suit in 2024, but it fell apart when litigation funding was terminated.

Few crypto schemes were as prominent as OneCoin, in terms of scale and the international intrigue that followed. Founders and associates have been imprisoned or killed, while the ringleader is still on the lam.

The Wild West of early crypto was often defined by schemes and eccentric characters, the effects of which, in the case of OneCoin, are still felt today. 

In 2014, cryptocurrency was still a niche internet phenomenon. The Bitcoin white paper was only six years old, and general knowledge of cryptocurrencies and blockchain tech was limited. Still, interest in the new asset class was rising among retail investors.

From August to December 2014, Ruja Ignatova and Karl Sebastian Greenwood founded OneCoin. Initial promotions began in Europe, and soon entities popped up in Bulgaria, Dubai and Belize. 

OneCoin’s structure was convoluted. Investors needed to buy packages of tokens that would allow them to “mine” OneCoin. There were several different price entry points for packages, with almost no upper limit. The most expensive, according to CoinMarketCap, was 225,000 euros.

Promoters, meanwhile, could earn commissions by bringing new investors into the program. This allowed the project to expand rapidly.

While marketed as a cryptocurrency, it was not decentralized. The coin itself was hosted on the centralized servers of OneCoin Ltd. The coins were not available for public trading and owners could only trade nominal amounts in a closed system. 

The project seemed fairly suspect from the outset, but fear of missing out, as well as the massive audiences drawn by Ignatova at seemingly above-board conferences, were enough to convince many.

Throughout 2015, the project grew across the globe in Europe, Asia, Africa and Latin America. Repeating the familiar MLM playbook, promoters emphasized urgency, and the immediacy of an impending explosion in value and crypto adoption. 

Regulators began to catch on by late 2015. Bulgaria's Financial Supervision Commission issued a warning about OneCoin, after which the company ceased all operations in the country. 

By 2016, several other national financial regulators also had OneCoin on their lists. By year’s end, Norway, Bulgaria, Finland, Sweden and Latvia were all investigating the project. The Hungarian central bank called it a pyramid scheme.

In December, Italian authorities defined OneCoin as an illegal pyramid scheme and demanded it cease activities in the country. China began investigating the project and even arrested some investors. 

Regulation efforts ramped up again in 2017. Germany, Thailand, Belize and Vietnam all issued cease-and-desist orders or declared OneCoin illegal. In India, undercover police arrested 18 organizers of a OneCoin event that attempted to bring in new investors. Indian authorities went so far as to charge Ignatova herself in July.

By the year’s end, things had reached a breaking point. Investors were concerned about delays in a supposed exchange that would allow them to cash out their coins. This was supposedly going to be addressed at an October meeting of OneCoin organizers in Lisbon, Portugal. 

But Ignatova didn’t show. According to a BBC investigation, she boarded a Ryanair flight from Sofia to Athens, Greece on Oct. 25, 2017. No one has seen her since. 

In early 2018, investigators moved in on the project. At the request of prosecutors in Germany, Bulgarian police raided the OneCoin offices in Sofia. The raid, which according to the Sofia Globe also included German police and Europol, seized servers and material evidence. 

In July, co-founder Greenwood was arrested on charges of money laundering and fraud in Thailand, where he would await extradition back to the United States.

Ignatova’s own lawyer, Mark S. Scott, was convicted of conspiracy to commit money laundering and conspiracy to commit bank fraud due to his connections and activities at OneCoin. He would be disbarred a few years later. 

OneCoin stayed in the headlines for the next couple of years as developments continued to unfold. In July 2020, two project promoters, Oscar Brito Ibarra and Ignacio Ibarra, were kidnapped and murdered in Mexico. Local media reported that local cartels, which were increasingly becoming interested in cryptocurrencies, could have been involved. 

In 2020, entertainment media in Hollywood reported that Kate Winslet would star in a movie about OneCoin. To date, it hasn’t started production. 

While Greenwood’s case proceeded in the United States, the Federal Bureau of Investigation put Ignatova on its Ten Most Wanted fugitives list in June 2023. 

In September, Greenwood was sentenced to 20 years in prison and ordered to pay $300 million in damages. He pleaded guilty to charges of fraud and money laundering. His sentence was a marked reduction from the initial 60 years sought by the prosecution. 

In 2024, the DoJ arrested and charged William Morro for bank fraud in connection with OneCoin. Morro moved some $35 million in OneCoin funds between banks in China and Hong Kong, and $6 million between Hong Kong and the US. Morro surrendered himself to authorities and pleaded guilty to one count of conspiracy to commit bank fraud.

In the latest news, the DoJ announced on Monday that $40 million in assets are available to compensate investors who bought OneCoin between 2014 and 2019 and recorded a net loss. 

By the time everything was said and done, some 3.5 million people had lost money to the crypto scheme. Authorities estimate that organizers ultimately made away with $4 billion in user funds. 

Ignatova remains at large and on the Ten Most Wanted list. The FBI is offering a $5 million reward for info leading to her arrest and/or conviction. 

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Source: CoinTelegraph