US officials arrest Kingpin, Konstantin Ignatov, in $3.7 billion ICO swindle

  • By Tom Cleveland

  • March 19, 2019
  • 2:35 am BST

Initial Coin Offerings (ICOs) have a bad reputation, since so many of the are outright scams from beginning to end, but no ICO has risen to the level of infamy as has the “OneCoin” program, a multi-level marketing pyramid that covered the globe with its tentacles, raking in an estimated $3.7 billion from its 3 million unsuspecting victims. News today is that U.S. prosecutors in New York have nabbed Konstantin Ignatov, the mastermind behind this ongoing scam, but his wife, Ruja Ignatova, remains at large.

The crime couple was indicted on charges of “wire fraud, securities fraud and money laundering, claiming the two defrauded investors out of “billions of dollars” using a fraudulent cryptocurrency.” The press release also added that: “prosecutors are alleging that OneCoin is a pyramid scheme, where members receive commissions to recruit other individuals to the project. These recruits are required to purchase crypto packages, and OneCoin currently claims to have 3 million members worldwide.”

U.S. Attorney Geoffrey Berman of the Southern District of New York stated that: “These defendants created a multibillion-dollar ‘cryptocurrency’ company based completely on lies and deceit. 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. Investors were victimized while the defendants got rich.”

OneCoin, a Bulgaria-based company that was founded in 2014, has always managed to be one step ahead of law enforcement officials, as it moved across the global landscape, duping its victims and convincing local patrons to support its scheme, which is still up and running today, according to the indictment. Cease and desist orders have been issued in other countries, while regulators shut down its offices, arrested local individuals associated with the illicit enterprise, and assessed fines and penalties.

OneCoin raised roughly $3.7 billion over a short period of time between 2014 and 2016. Its global reach was astounding. According to one report: “Authorities across a number of nations – including Belgium, the U.K., Uganda, Italy, Nigeria, Germany, India, Hungary, Belize, Vietnam, Austria, Finland, Luxembourg, Bulgaria, China and Samoa – have been warning or cracking down on the OneCoin project since 2016 on similar pyramid scheme or fraud concerns. Prosecutors in China have charged more than 100 individuals with deceiving investors, and have successfully convicted several of these defendants. Indian authorities have likewise arrested some of the project’s promoters.”

OneCoin was a sham from the get-go, promising ridiculous returns and never operating on a blockchain server, as described in its marketing materials. The absurdity of the proposition continued even after members asked when they could withdraw their funds. Ignatov’s response should have been a tip off: “if you are here to cash out, leave this room now, because you don’t understand what this project is about.” New York County District Attorney Cyrus Vance declared in a statement: “These defendants executed an old-school pyramid scheme on a new-school platform.”

Mark Scott, another principal in the OneCoin scam was arrested and indicted last year. He currently faces a maximum 20-year jail sentence. Ignatov will face a similar sentencing, but his wife, if and when arrested, could be looking at 85 years in prison. She has five charges on her crime sheet, which could multiply time to be served, if she is found guilty.