The leaders of an alleged multibillion-dollar international pyramid scheme that involved the marketing of the cryptocurrency OneCoin were charged by U.S. prosecutors with fraud and money laundering.
The alleged head of the scheme, Konstantin Ignatov, was arrested Wednesday at Los Angeles International Airport and charged with conspiracy to commit wire fraud, Manhattan U.S. Attorney Geoffrey Berman said in a statement. Ignatov’s sister Ruja, the founder and original leader of OneCoin, was charged with wire fraud, securities fraud and money laundering. She hasn’t been arrested.
OneCoin generated 3.4 billion euros ($3.8 billion) in revenue from the fourth quarter of 2014 to the third quarter of 2016, prosecutors said. The alleged value of OneCoin rose from 50 euro cents to 29.95 euros in January and the company claimed to have more than 3 million members worldwide, prosecutors said.
But OneCoin had no real value, offered investors no way to trace their investments and couldn’t be used to buy anything, according to the U.S. The scheme operated as a marketing network, where members got paid commissions for recruiting others to purchase cryptocurrency packages, prosecutors said.
"These defendants created a multibillion-dollar ‘cryptocurrency’ company based completely on lies and deceit," Berman said. “They promised big returns and minimal risk but, as alleged, this business was a pyramid scheme based on smoke and mirrors more than zeroes and ones.”
Ruja Ignatova created OneCoin in 2014 in Sofia, Bulgaria, and headed the organization until she vanished from the public eye in October 2017, according to prosecutors. Her brother assumed the top leadership position in the middle of 2018, they said.
Bulgarian authorities raided the offices of One Network Services EOOD, a Bulgarian commercial agent of OneCoin Ltd., in January 2018 as part of an international investigation into allegations that the virtual currency may have been used by organized-crime groups. Prosecutors in Sofia said at the time that OneCoin was also being investigated in the U.K., Ireland, Italy, U.S., Canada, Ukraine, the Baltics and other countries.
China prosecuted 98 people and recovered 1.7 billion yuan ($253 million) in 2018 in connection with the alleged pyramid scheme, according to a report in state-owned Procuratorial Daily
