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August 25, 2019

New-school system for old-school scam: Cryptocurrency founders busted for running pyramid scheme: prosecutors

March 13, 2019
Cryptocurrency crooks defrauded investors of billions, the feds say. (iStockphoto)

A fraudulent cryptocurrency is at the heart of charges against the leaders of a pyramid scheme that defrauded investors out of billions of dollars, federal prosecutors said Friday.

The scammers behind OneCoin Ltd, and OneCoin were behind a commission-based marketing network that promised low-risk, high-reward returns for participants in a cryptocurrency platform that was as phony as a $4 bill.

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According to prosecutors, Konstantin Ignatov, who runs OneCoin Ltd, and his sister Ruja Ignatova, who co-founded OneCoin, were charged with wire fraud conspiracy.

Ignatov, 33, of Sofia, Bulgaria, was arrested Wednesday at Los Angeles International Airport.

Prosecutors said Ignatova, 38, also of Sofia, disappeared in October 2017 and remains at large.

A third defendant, lawyer Mark Scott, 50, of Coral Gables, Fla., pleaded not guilty last September to conspiring to launder more than $400 million of proceeds from the scam.

“As alleged, these defendants created a multibillion-dollar ‘cryptocurrency’ company based completely on lies and deceit,” U.S. Attorney Geoffrey Berman said in a statement. “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.”

Unlike authentic cryptocurrencies, which maintain records of their investors’ transaction histories, OneCoin had no real value, according to investigators. It offered investors no way to track their money, and could not be used to purchase anything.

Authorities said the brother and sister convinced people to invest based on complete lies about the virtual currency. OneCoin Ltd. operates as a multi-level marketing network through which members receive commissions for recruiting others to buy cryptocurrency packages. The company has claimed to have more than 3 million members worldwide.

“As alleged in the indictment, these defendants executed an old-school pyramid scheme on a new-school platform, compromising the integrity of New York’s financial system and defrauding investors out of billions,” said Manhattan District Attorney Cy Vance Jr.

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