What Is OneCoin?
OneCoin is a pyramid or Ponzi scheme founded in 2014 by Ruja Ignatova, who promoted it as a promising cryptocurrency that would outperform Bitcoin. Like other digital alternatives to fiat money, it instantly became a popular virtual coin that people can use for making online transactions.
Ignatova claimed her digital currency to be easier, faster, and safer. Upon joining the service through OneCoin login, individuals have their e-wallet created automatically, giving them centralized control over the transactions. Before shutting down its internal marketplace xcoinx in 2017 amid warnings from many countries, federal agencies, and banks about potential risks involved in the digital currency, and the disappearance of Ignatova in 2017, the scheme is believed to steal around $4 billion between 2014 and 2016.
- OneCoin is a digital currency that came into existence in 2014 and promised to beat Bitcoin. But due to suspicious activities, soon it turned into a pyramid and Ponzi schemePonzi SchemeA Ponzi scheme is an act of fraud in which potential investors invest with high expected returns and minimum or no expected risk, whereby returns are generally generated for early investors to attract new investors. The amount invested by new investors is used to pay off earlier investors..
- Oxford law graduate Ruja Ignatova founded this scheme, later declared as a fraud. She claimed the digital coin as the best solution to get rid of intermediaries in financial transactions.
- The OneCoin Exchange xcoinx was the only marketplace to convert digital currencies into euros. These euros could be transferred to the bank accounts directly via an e-wallet.
- The U.S. Department of Justice started investigating the company following the shutdown of xcoinx twice in less than a year. It found the platform lacked a blockchain network and mining of coins was fake, so coins had no actual value.
OneCoin was introduced in the cryptocurrency market by Oxford law graduate Ruja Ignatova in 2014 with the claim of becoming the best digital currency. Among her other claims were mining coins, providing an e-wallet, and facilitating trades and transactions. It also promised people joining the digital revolution would gain simple, swift, and secure access to financial services.
She promoted the coin as the most effective means of removing greedy financial institutions from the traditional payment channel. As the concept of cryptocurrency eliminates the need for any intermediary and establishes a trustless network for transactions, this digital coin became the most sought-after digital currency during that period.
This virtual coin quickly grew a large consumer base in more than 195 countries across six continents. The investors preferred holding the digital currency for an extended period as they knew that the OneCoin value would increase with the increase in its market demand.
This cryptocurrency exhibited its Ponzi scheme traits when it adopted the pyramid structure. Instead of selling the digital coin directly to consumers, it introduced buying packages, such as educational materials. Buyers of the course packages were to receive tokens that they could use to mine the virtual coins. However, educational resources offered were plagiarized in most cases, while these tokens kept buyers intact.
Ignatova co-founded OneCoin Ltd. and OneLife Network Ltd. with Sebastian Greenwood and worked as its founder for two years until she mysteriously vanished in October 2017. Thus, once touted as the potential virtual currency, it ended as the OneCoin scam – one of the biggest cryptocurrency frauds of all time.
The xcoinx was an internal marketplace open to investors who have spent more than the starter packages allowed. Based on which course package an investor has bought, the exchange placed a cap on selling them. With xcoinx, individuals could convert their coins into euros. Above all, the company claimed to have provided an e-wallet for every individual joining the platform. It would have made digital currencies eligible for wire transfers. So, individuals could transfer these euros to their bank accounts directly.
However, everything claimed by the company proved to be a hoax for several suspicious reasons. For instance, trading of tokens for euros was allowed with the company only. Furthermore, the company operated in two segments. The first focused on marketing and promotion. And the second ran a Ponzi affiliate program letting people earn profits only through commission for inviting others.
The exchange became temporarily unavailable for two weeks on March 1, 2016, without any prior notice for supposed server maintenance purposes. It created panic among investors as they can withdraw their funds from here only. Though it opened again on March 15, 2016, traders noticed that many transactions expired. However, in January 2017, the exchange got shut down again without any prior notice.
While promoting cryptocurrency, Ignatova organized and attended multiple seminars across the world. In those events, she assured people that any investment made in the company would return to them in a threefold profit. In addition, she promised that if existing investors sell their packages to friends or peers, the commission would be sufficient to make them billionaires. This strategy worked for the company, and many investors came forward to invest in it.
Because these claims were too good to be true, OneCoin soon came under the radar of many governments, federal authorities, and international financial institutionsFinancial InstitutionsFinancial institutions refer to those organizations which provide business services and products related to financial or monetary transactions to their clients. Some of these are banks, NBFCs, investment companies, brokerage firms, insurance companies and trust corporations. . They observed that the so-called coin was not a cryptocurrency as it lacked a blockchain, the core of digital currencies. What was even more surprising that no one could use these digital coins for trading or transaction purpose, e.g., shopping.
In January 2017, when xcoinx got shut down for the second time in a row, many financial institutions like the Hungarian Central Bank and anti-fraud agencies like the Italian Antitrust Authority began issuing a warning against this digital coin. As a result, many nations started to investigate whether the company was genuine and proposed a ban on the company.
Federal Investigation Of OneCoin
The United States Department of Justice observed that Ignatova’s false promises worked. The company generated $3.77 billion in revenues and $2.51 billion in profits during 2014-2016. It used the funds to pay out the investors to ensure its true intentions remain hidden until it achieves the target.
The Department stated that the company used to determine the OneCoin price internally rather than market demand. During the investigation, it found that it lacked a proper blockchain for recording and tracking the transactions. Therefore, mining coins was not possible at all. It means coins allocated to members were fake ones.
In October 2017, Ruja Ignatova missed a seminar held in Lisbon, Portugal, which marked the beginning of her disappearance. Most people believe that she is kidnapped or killed by the bigwigs in the financial marketsFinancial MarketsThe term "financial market" refers to the marketplace where activities such as the creation and trading of various financial assets such as bonds, stocks, commodities, currencies, and derivatives take place. It provides a platform for sellers and buyers to interact and trade at a price determined by market forces.. But the Federal Bureau of Investigation (FBI) report tells a different story.
On October 25, 2017, the OneCoin founder boarded a flight from Sofia, Bulgaria, to Athens, Greece, and since then, nobody has seen her. The FBI arrested Greenwood in 2018 and her brother Konstantin Ignatova in November 2019 in connection with this one of the biggest Ponzi schemes.
To no one’s surprise, the corporation has denied claims that it is not a digital payment system and is operating normally.
Frequently Asked Questions (FAQs)
OneCoin is one of the largest pyramid and Ponzi schemes introduced by Ruja Ignatova in 2014 as a digital currency. She claimed the coin to be the next big thing in the cryptocurrency revolution and better than the market leader Bitcoin. Before her disappearance in 2017, the scheme pulled around $4 billion from investors during 2014-2016.
Yes, it still sells course packages online. But the business has declined and is not as operational as it was before. Following the investigations of its business activities, experts expect it to dissolve soon.
Earlier, people believed that Ruja Ignatova was kidnapped or killed by the biggies in the financial markets. But the FBI stated that she boarded a flight from Sofia, Bulgaria to Athens, Greece on October 25, 2017. Since then, her location is unknown.
This has been a guide to What is OneCoin and its Definition. Here we discuss the federal investigation of OneCoin, exchange, and understanding along with fraud. You may also have a look at the following articles to learn more –