The US Federal Bureau of Investigation (FBI) has arrested Konstantin Ignatov, the alleged leader of a suspected cryptocurrency pyramid scheme called OneCoin. Ignatov and his partners are accused of defrauding investors out of over $4 billion.
OneCoin was founded in 2014 by Bulgarian businesswoman and Konstantin’s sister Ruja Ignatova, who served as OneCoin’s top leader until her disappearance two years ago. Since 2016, the project has been a subject of investigations in China and India, and several regulators have issued warnings against its operations.
OneCoin operates as a multi-level marketing network where more than three million members worldwide were offered a reward for buying coins and attracting more users. The platform pays its affiliate members commissions for introducing others to purchase its cryptocurrency and contribute to a related ICO.
The pyramid worked throughout Europe and Asia for more than two years and attracted millions of dollars before the regulators of different countries began to worry about the legitimacy of this business.
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In 2017, the government of Kazakhstan clamped down on the company, labeling it a scam that promoted a cryptocurrency Ponzi scheme, given its structure which promises 10x ROI in a few months – which is a clear sign of a pyramid scam.
US lawyer arrested for laundering OneCoin money
A few months later, Ignatova was arrested in India along with another 30 individuals, charged with running a scam involving thousands of investors. Indian police noted that OneCoin money was stored in 35 different bank accounts, and the majority of it was transferred to an unknown location shortly after the arrests were made.
According to the official court document, the FBI has also arrested Mark Scott, a former partner with the international law firm Locke Lord, who has been accused of laundering approximately $400 million, which investigators claim is the proceeds of OneCoin scheme.
Investigators say that Scott laundered funds through hedge funds in the Cayman Islands and sent the majority of these funds back to the unnamed founders of the scheme.
Commenting on the news, FBI assistant director William Sweeney said: “As we allege, OneCoin was a cryptocurrency existing only in the minds of its creators and their co-conspirators. Unlike authentic cryptocurrencies, which maintain records of their investors’ transaction history, OneCoin had no real value. It offered investors no method of tracing their money, and it could not be used to purchase anything. In fact, the only ones who stood to benefit from its existence were its founders and co-conspirators. Whether you’re dealing with virtual currency or cold, hard cash, we urge the public to exercise due diligence with any investment.”