Three Essential Crypto Lessons Investors Can Learn from the OneCoin Scam

Scams are rife in the world of crypto. But OneCoin is arguably the most successful cryptocurrency scam in history. Between 2014 and 2016, the project raked in $ 4 billion from investors based all over the world. Despite the fact that it was never even listed on an exchange, it drew in cash from almost every nation you care to mention.

Its co-founder Ruja Ignatova, aka “Dr. Ruja,” disappeared without a trace in 2017 after spending millions of her investors’ dollars on luxury apartments and other assets. Its co-founder Sebastian Greenwood was jailed for wire fraud in the United States, while Dr. Ruja’s brother Konstantin, later the OneCoin CEO, has also been put behind bars.

Years later, police the world over are still chasing down OneCoin execs. It may take them decades to track them all down.

The Court of Appeal in Nancy, France has granted the US extradition request for Luxembourg ex-spy Frank Schneider sought in the multibillion OneCoin crypto fraud. His lawyers will appeal the decision (pourvoi en cassation) (Photo: Marc Wilwert) via @LuxTimes pic.twitter.com/5Eq4818Nij

— Yannick Lambert (@YannickLamber11) January 19, 2022

But this remarkable story – soon to become a major Hollywood movie starring Kate Winslet as Dr. Ruja – has some important takeaways for crypto investors who want to learn how to spot a scam

In the World of Crypto, if Something Looks Like an MLM Scam…it Probably Is

Contrary to what naysayers say about crypto, it’s not a pyramid scam. Last month, an FT contributor wrote that “calling Bitcoin a Ponzi scheme,” was “arguably being too kind.” But what the FUD brigade misses is that cryptocurrencies are the product of blockchains, which are immutable and uneditable in nature – due to the fact that they do not exist on a single database, but rather are a shared network that continues to exist even if an individual node goes offline.

Blockchains are a powerful financial tool: They are possibly the ultimate accounting tool, in fact, because anyone in the world with internet access can examine all transactions conducted on them at any given time. With the exception of privacy coins like Monero, you can see how many tokens an individual wallet owns, when coins left a wallet, where they went and so on.

A multi-level marketing (MLM) scam operates in the shadows, using fabricated records or inaccessible ledgers – just like OneCoin, which kept much of its accountancy a secret and didn’t even have a blockchain.

Instead, the sum total of its accounting appears to have been conducted on a bunch of PCs in a small office in Sofia, Bulgaria, that was hurriedly emptied one day in 2019.

Some action at the OneCoin HQ at last. Doors opened. A small beaten down van parked in front and was filled with various office equipment and supplies. Didn't seem to be the contents of the famous 3rd floor cash room 🙂 Looked as if the company is moving out, but who knows… pic.twitter.com/vH0XzMFef0

— ᑎIᑕKOᒪᗩY ᔕTOYᗩᑎOᐯ (@Svrakata) November 21, 2019

In the world of bona fide crypto, nobody will ever try to “recruit” you. There are no “membership levels,” you don’t get “referral bonuses” or “guaranteed returns” on genuine exchanges. Sure, some protocols occasionally offer airdrops and exchanges offer promotional giveaways. But there is a clear line between marketing and outlandish MLM promises. When a “crypto” project starts trying to get you to press-gang your friends and relatives into “joining” something or other, it’s almost certainly a wolf in sheep’s clothing.

If Somebody Tells You Their Project’s the “Next Bitcoin” – Run the Other Way!

It is June 11, 2016. In London, “Dr. Ruja” takes to the stage in Wembley Arena, the UK’s premium concert venue. Flames shoot out of the stage as she enters, while “This Girl Is on Fire” by Alicia Keys blares on the sound system. Wearing a flowing red dress, Dr. Ruja tells the enthralled audience that OneCoin’s market cap is now second only to Bitcoin. In fact, she says, her protocol is the “Bitcoin Killer.”

“We don’t have far to go,” she enthuses. And if everyone just keeps on investing their money, “in two years, nobody will speak about Bitcoin anymore.”

While there is undoubtedly some competition among crypto communities – there are bitcoin-only folks like the Twitter founder Jack Dorsey and Ethereum advocates who champion their favorite coin among all others. But when it comes to token founders, animosity is rare. Even crypto celebs like Vitalik Buterin, the Ethereum co-founder and Changpeng “CZ” Zhao, the founder of Binance Coin, have admitted to holding Bitcoin and other tokens.

Solana is billed by proponents as an Ethereum “killer,” but the co-founder of the protocol, Raj Gokal, has shunned this kind of label.

it’s not just pretty words, man. it really doesn’t have to be a fight. more key pairs are better. users will be able to switch as these platforms prove out or don’t prove out over time.

the TAM is every human with a computer and we should all be trying to get them on web 3.0

— raj.sol (@rajgokal) November 10, 2021

Real high-worth protocols are not interested in being the only show in town. There is plenty of space in the industry for successful protocols and those trying to “catch” BTC and the rest are likely making pie-in-the-sky promises aimed at nothing more than filling their pockets with your cash.

Beware Charismatic “Leaders” – and Remember Crypto’s Supposed to Be Decentralized

Dr. Ruja was ostensibly the perfect antithesis to the Vitalik Buterins of this world. While the latter is a bookish, understated, nerdy, intellectual type, Dj. Ruja was the opposite: She was the last word in charm.

And while Buterin is only a cog in the Ethereum machine, Dr. Ruja was anything but. She actively sought out the limelight, making incredible promises of fabulous wealth.

Remarkable words by Dr. Ruja Ignatova! pic.twitter.com/RDrlq0qop6

— OneCoin (@OneCoinCrypto) April 6, 2016

But in the real crypto sphere, this kind of focal point is almost always a bad sign. Crypto’s big selling point is its decentralized nature – a factor that makes a protocol almost indestructible after it has grown to a certain size. The less you hear about the founder of a protocol, and the more you hear about a large community of busy developers’ plans to improve the network, the better.

Few people have dug up as much dirt on this scam as the British journalist Jamie Bartlett – the creator of the most famous exposé of OneCoin yet: the BBC’s “Missing Cryptoqueen” podcast. In summing up Dr. Ruja, Bartlett wrote that “most frustratingly of all, she correctly guessed that by the time we realized [the extent of her scam], she’d be gone, along with the money.”