OneCoin: The Big Crypto Scam
The crypto world stands on the pillars of faith, trust and security. This scam, however, uproots all those pillars.
Crypto is no longer the new fad in town. It is the next big thing. Period. Probably the next “new normal”. And, why not?
It operates on Blockchain technology, a common ledger tracked by all operators. Every time a transaction takes place, a copy of the same is posted in everyone’s ledger. A safe, and 100% transparent way of making transactions. Trustworthy enough, right?
Now, bitcoins aren’t the only cryptocurrency we have. Other cryptos have come and gone, but Bitcoin stayed. One such crypto that made a temporary visit to the crypto world is OneCoin.
Why temporary? Why did it have to go? Read on.
OneCoin was the brainchild of a woman who set foot into the entrepreneurial world with the vision of democratising money. She wanted to introduce a cryptocurrency, which would be superior than ever. She wanted this crypto to be the “Bitcoin Killer”.
Ruja Ignatova, the protagonist of this story, was an Oxford graduate, a Bulgarian entrepreneur, famously known to move people with her words, and her vision to change the world. She knew how to pull a crowd, and that’s exactly what she did.
She introduced the idea of OneCoin in one of her seminars, back in 2014. The beauty of OneCoin, she claimed, was in its simplicity. Easy to understand, easy to use (Just like the pieces that we write 😉).
And so started her revolution. She organised seminars and conventions to promote OneCoin, to convince people of her crypto, and her vision. And, she succeeded. People were all in for it. You see, that’s the thing with humans - give them anything new, make them count two benefits of it, and they will give their heart and soul into that “new trend”.
All convinced, people started investing their hard-earned money in this new crypto. So much so, that the crypto got two million active users and a capitalisation of 4.5 bn Euros in just a year and a half of activity!
But, what was it about OneCoin that convinced people? Merely those promising words of Ruja? And, how was OneCoin different from Bitcoin? Did it have some magic ingredient, which made it a sweeter investment?
Let’s see.
The business of the company, OneCoin, was not around Blockchain. Its main business was to sell educational content, like courses on cryptocurrencies and trading. The buyers of the courses would then receive “tokens”, which they could use to mine OneCoins.
“Okay, sounds interesting. But, how could the users make money?”
Well, the buyers were rewarded for bringing in more people to the platform. (Queen of multi-level marketing!) They could also exchange their tokens, for cash and other currencies through an internal exchange, called xcoinx. But, only…
Those who purchased more than the basic starter course could access this exchange to sell their tokens. That too, was capped at a certain limit. Why? Apparently, the company could only manage small selloffs. So, you could only sell your tokens after buying more than the basic course? That too, only to a certain limit?! Not much scope of profit, huh?
Well, then the only way to make reasonable profits was by inviting others and earning commission on that - 60% in Euros, and 40% in tokens.
Tokens. And, that’s where the whole thing gets shady and mysterious.
The users could only trade tokens with Euros with the company, and not among themselves. But, this is how token money at a fun fiesta works, not a crypto currency.
How “decentralised” is this blockchain then? Um, not at all.
“What’s the point of the blockchain then?!”
Hahaa, there was no Blockchain at all! That’s right. The very foundation of this cryptocurrency was broken. In fact, there was no foundation at all.
“Wow. How did the company pull off such a stunt then?”
It was all a Ponzi scheme. Taking money from one hand, and passing it on by the other. OneCoin made money by selling the educational courses on its platform. It then rewarded these buyers for bringing in more people. This meant more money. And, only people who bought the expensive courses were given access to the exchange. To top it all off, only small payouts were given by the company. Inflow of money was way more than the outflow. It was merrily making money by betting on others’ money.
And, well. The tokens were fake, too. They had 0 value. Remember the 40% commission received in tokens? Null and void. Nada. Oh, and the “educational content”? All plagiarised. People were essentially giving money to get nothing. Smart move, lady queen.
But, the company had to convince people that the tokens had real value, and were in demand. The value of the coin had to fluctuate, according to the demand and supply in this market. So…
The clever programmers of this “centralised” system manually programmed the coin’s value to increase from 0.5 Euros to all the way to 29.95 Euros! All on a SQL database, which could never operate on a blockchain xD.
It was all a well-thought, beautifully executed plan by the mastermind, Ruja Ignatova. So much so, that the company got hold of two blockchain audit reports to present when anyone questioned the integrity of the system!
Until, one day…
A Blockchain expert, Bjorn Bjercke, was approached by a recruitment group in 2016 and offered the role of global CTO for OneCoin, $ 250,000 in salary, a car and two apartments. What for?
To create a blockchain. For OneCoin. Woah!
He refused, because:
Two years after the launch of the crypto, they wanted to create a Blockchain. This got him thinking “How can an existing cryptocurrency company not have a Blockchain?”.
Even if he created a blockchain, the transactions made so far could never be imported into the system. So, what is even the point?
The Final Showdown
In January 2017, OneCoin was shut down without notice… forever. It denied several requests for withdrawal, leaving people’s money trapped… forever.
US prosecutors estimated that around $4 billion had been raked in from around the globe as part of this Ponzi scheme.
And, what about our mastermind, Ruja? Well, she’s gone… just vanished into thin air. According to FBI records, she was last seen boarding a flight from Sofia to Athens in October 2017. Since then, she’s nowhere to be seen.
After the disappearance, her brother, Konstantin, took over as the CEO of OneCoin. Two years later, he was arrested in November 2019, pleading guilty to fraud and money laundering.
OneCoin still continues to operate in some parts of the world today, in spite of coming out in the negative light. There are people who still believe in the empty promises of this company. People who are still in the dark, and yet to see the light. Why? Trust.
Remember, Bitcoin stayed. Why? Trust.
The world works on trust. When people “believe” in something, it often becomes the “next big thing”. And, this very “trust” became the reason for exploitation of so many investors in the OneCoin saga.
People trusted Ruja. Believed in her. And, their trust took the form of blind followership, blurring the line between rationality and emotions.
This scam brings to light the vulnerabilities of the human psyche. How mere trust and greed of a few, and the herd mentality of others can corrupt an entire system (which ironically stands on the pillars of transparency, security and faith). How the people who know something, and have strong influential power, can exploit the ones who don’t.
On the flip side, what do these influential people get?
A few million dollars. But, at what cost? They spend the rest of their lives fleeing from place to place, hiding their identity.
What good is money if you can't live a free life? Is it really worth it?
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