Hello everyone, I hope you all are doing well, this past week, Bitcoin took a tumble and went down below $30K. Well, this was quite a bummer but what can we say that's how it is and we can't argue with that. But what if I told you that there was a bitcoin killer which happened to be a scam, in fact, it is still there and very much functioning. Yes, it's true, it was a proven scam and somehow still operating, go ahead to learn what and how it happened?
The Scam And OneCoin
It all began after the bull market of 2013, probably in the second half of 2014. This was the time when bitcoin was slowly transforming towards an investment category and alternatives of bitcoin were already introduced in the market. One such alternative was OneCoin, it was also termed as bitcoin killer by its regulators, why regulators? you will know soon. The promoters of OneCoin promoted it as the next big thing in the cryptocurrency and they even said that after 2 years no one will talk about bitcoin.
OneCoin sold its product by labeling it as educational packages consisting of material related to financial independence in six different tiers. These packages contained tokens to allow one to mine OneCoin which people can later trade on their exchange. But this never happened. The only profit for members was coming from inviting others and getting a commission from it, 60% in EUR and 40% in tokens, but the tokens were useless.
At that time the technology of blockchain was not known to many people but the reach of crypto was expanding drastically. Due to high promotion and fancy offerings, people started investing and were told that soon there will be an exchange at which they can sell and trade OneCoin. But as of now, no such exchange exists and there are still people who believe that there will be one.
There's a high possibility that more than 3 million people fell for it. If we talk about the money involved then the leaked documents from BBC suggest that it was around $4.5 Billion but this figure is only applicable to the investments made till 2017. Some unofficial resources mentioned that after the major crypto boom of 2017 this figure stands at more than $19 Billion which is crazy. The saddest part is, it is still going on and the founder, Dr. Ruja Ignatova is missing for the past 4 years and could be very well alive.
OneCoin is considered a Ponzi scheme due to its organizational structure and because of the previous involvement of many of those central to OneCoin in similar schemes. They were also operating with the name of OneLife. It was described by The Times as "one of the biggest scams in history".
Who Is Dr. Ruja Ignatova?
She was listed as the founder of OneCoin. She claimed to have some fancy degrees, a Ph.D. in European private law, and to have appeared in world-famous magazines. Which was later found out to be a paid advertisement in Forbes Bulgaria. She was born in Bulgaria and moved to Germany with her parents in her childhood. Prior to 2014, she was already involved with some fraud cases in Germany. One of them was with her father Plamen Ignatov, in the acquisition of a company that shortly afterward was declared bankrupt. She is also termed the missing Cryptoqueen and was the subject of the 2019 BBC podcast series The Missing Cryptoqueen.
She talked about OneCoin as soon to be the world's biggest cryptocurrency and will be used for payments in every corner of the world. She was quite active in the events or webinars of OneCoin and we can say, she was influencing people towards OneCoin rather than just selling the product. The charismatic personality and qualifications of Dr. Ruja made her unquestionable. OneCoin had become a cult. People were so optimistic about it, they wouldn’t listen to anyone’s opinion. In 2017, she was supposed to appear at an event in Lisbon, but Dr. Ruja didn’t show up.
After she disappeared her brother took over the OneCoin mantle. He was arrested in March 2019 at LA airport. In November 2019, Konstantin Ignatov pleaded guilty to charges of money laundering and fraud.
In BBC's podcast, they claimed to have some pieces of evidence and testimonies to prove that Dr. Ruja is still very much alive and living under a false identity in Frankfurt.
How Did They Make It Work?
Now the biggest question is why nobody realized that it was a scam and even today why it is still active. Let's see the factors which favored them.
Marketing
Marketing plays an important role in a product's sale and that's what OneCoin did aggressively. But not just that they did it brilliantly. Let me explain how.
Usecase: The main use case for their product was to introduce a cryptocurrency that will become the future currency for every transaction, with no or minimum fee, instant transfers, no limits and boundaries, and anyone can access it. These things made people believe in their project. But this was their approach to introduce their product in the events and conferences. It was a topic of discussion in various countries such as China, Palestine, Hong Kong, India, European Countries, African Countries, and many more.
Competition: This drew the attention of people towards OneCoin. As Bitcoin was already the talk of the town, OneCoin specifically targetted it and presented their coin as a bitcoin killer which struck a chain of reaction in the people to not miss on this golden opportunity. Now, this worked wonderfully for them because as I recall till 2015, I've never heard of bitcoin, but one day someone passed me a flyer in the market. I remember that it was a 2 page, red color flyer mentioning Bitcoin and OneCoin. But as it seemed irrelevant to me I passed it on.
Approach: Now, the OneCoin's team was marketing their product with technical terms and all that buzz of crypto but when it came to selling it, they made it an investment plan, that too a juicy one. People have already experienced the bitcoin storm and didn't want to miss a similar opportunity, So, when they heard about OneCoin and the talks of it going 10x, 20x, 30x folds, or even more, people saw a life-changing opportunity. People could choose between several education packages that cost between €110 and €188,000.
Limited Knowledge
This made their not-so-valid product a believable one, as there was a lack of understanding in a wide range of people that how blockchain works. OneCoin didn't even have a blockchain, they were running an SQL database, which means their database manager can change the value of the coin to whatever they wanted. And that's how the value of OneCoin was fluctuating. And it took 2 years for people to question this. I know it myself because the flyer I talked about earlier, explained what is bitcoin but then focused on how OneCoin will take place of bitcoin. They never mentioned how OneCoin works. There are numerous excerpts which state this fact.
Referring to an offer Bjorn Bjercke received in October 2016, the recruitment agent mentioned in the conversation that:
Well, first of all, they need a blockchain. They don't have a blockchain today.
Bjorn Bjercke refused the offer questioning how come a cryptocurrency company didn't have their established blockchain.
Referring to Jen McAdams skype call with Timothy Curry and follow up consequences, when Jen persistently asked about the blockchain from the leaders of her OneCoin group, after many denials she got a voicemail in April 2017 stating that :
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.
These are just two but you can find more.
They were manipulating everyone with a centralized system for almost 3 years, it's unbelievable, cause I don't think it's possible today but somehow they pulled it off.
MLM's And Hatred Agenda
Yes, that's correct, they used MLM - Multi-Level Marketing to sell and increase the reach of their product. That's not it, they did it brilliantly, how? Well, by involving people who were already in MLM and have an established network of thousands of people. This strategy rapidly intensified their growth. Most of these MLM leaders didn't even know what they were selling and thought that this is a valid product. That's why most people didn't even question what they were investing in because they trusted their leader, who has been leading them from earlier projects.
As these MLM's have a cross-country reach, this made OneCoin to flew in the neighboring countries other than they targeted. Incentives were tempting and people started to introduce OneCoin to their family and friends. Reports even confirmed that many people sold their properties such as cars, houses, real estate, and more. Most of them reinvested their incentives into OneCoin to receive bigger returns in the future.
That's not it, whosoever opposed OneCoin were termed as haters. The group leaders said don't listen to anybody who calls us fraud or scam. They are simply trying to pull you down. There ever evidence that some mysterious people were also involved from behind the curtains, and threatened those who tried to expose OneCoin. Soon there is a sort of community that didn't listen to outsiders and focused on the intel coming from their seniors.
Multi-Country Establishment And Crypto Laws
One of the biggest reasons why they are still active today, even though they have been charged for fraud is the vague crypto laws and the strategy of Diversifying their offices. One thing in which they excelled was planning. OneCoin used loopholes in various security systems, international laws, and non-regulation of crypto in many countries.
They opened offices in different countries, used different people in charge of these offices. Linked all these in a complex web, so that, they can always find a way out for legal situations. Offices were located in Dubai, Bulgaria, Hong Kong among other countries. Made their cryptocurrency to qualify the vague crypto regulations in many countries. People were also focused on investments and didn't really care about the basics which came in handy promoting OneCoin.
On 30 September 2015, Bulgaria's Financial Supervision Commission (FSC) issued a warning of potential risks in new cryptocurrencies, citing OneCoin as an example. After the warning, OneCoin ceased all activity in Bulgaria and started to use banks in foreign countries to handle wire transfers from participants. This is just a single example, there's more like this and that's how they managed to survive for so long.
The Current Situation
Well, today there are several fraudulent cases registered against OneCoin, its founders, members, or promoters in various countries. Some of the members are behind the bars and some of them are already out on bail. There's an ongoing trial on OneCoin in the US.
Dr. Ruja Ignatova is still missing and no one knows where she is, proof of her being alive has been found several times but maybe with plastic surgery, she is hiding in plain sight. In November 2019, Konstantin Ignatov pleaded guilty to charges of money laundering and fraud.
Despite all this, OneCoin is still active, not on a grand scale or even not functioning properly but with their multiple active sites, people who have invested are still hoping for something from OneCoin.
Closing Thoughts
The purpose of this article is to create awareness and sort of providing a learning experience. I have to agree that whatever OneCoin managed to pull is a solid example of Active planning. They focused on every aspect and created this illusion which engulfed so many people. In my opinion, Dr. Ruja was only a facade, her enigmatic personality was used to hypnotize others. Because she did had the skills to enchant people but to laid the fundamentals for something this big you need much more.
Maybe OneCoin was never supposed to go this big and the pressure was increasing day by day. This could be the reason why Dr. Ruja ran off, she must've deduced that everything is going to fall on her and the only way out was to lay down. She was just a front used by a group of people to manipulate others.
There's much more to talk about OneCoin but I'm stopping here. If you like to dig deeper then go ahead and check resources or listen to The Missing Cryptoqueen podcast by BBC.
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Resources
https://hackernoon.com/biggest-cryptocurrency-scams-whats-the-damage-4c9u32ri
https://levelup.gitconnected.com/biggest-crypto-scam-in-history-worth-15-billion-381e97cf2c0f
https://www.bbc.com/news/stories-50435014
https://www.theguardian.com/tv-and-radio/2019/nov/04/the-missing-cryptoqueen-the-hunt-for-a-multi-billion-dollar-scam-artist
https://medium.com/daomaker/onecoin-scam-that-became-a-religion-48105ef9cace
https://www.bbc.co.uk/programmes/p07nkd84/episodes/guide
https://en.wikipedia.org/wiki/Ruja_Ignatova
https://en.wikipedia.org/wiki/OneCoin
https://www.adaptiveplanning.com/products/what-is-active-planning