Cryptocurrency firm OneCoin is officially sued for scamming thousands of investors in a Ponzi scheme with one of the plaintiffs using over $700,000 in the scam.
A class action document was filed on May 7 at the US Southern District Court of New York for multiple charges against four executives behind OneCoin. The crypto startup is the brainchild of brother and sister duo Konstantin Ignatov and Ruja Ignatova, Sebastian Greenwood and Mark Scott.
The U.S. Department of Justice indicted OneCoin’s founders for scamming investors through a multi-national Ponzi scheme that made false promises of “guaranteed” profits.
According to documents submitted in a Manhattan court, proposed lead plaintiff Donald Berdeaux invested approximately $755,918.92 in OneCoin between August 2015 and May 2016. In 2015, between August and November, Berdeaux invested $252,096.32 in the OneCoin cryptocurrency scam. The following year Berdeaux topped up his investment with an additional $504,822.60.
Other investors have also come forward to join the lawsuit with substantial losses of over $100,000. Berdeaux’s proposed co-lead plaintiff Christine Grablis also lost over $100,000 by investing in OneCoin . Per documents filed in the lawsuit, Grablis invested $64,813 between August and November 2015. In 2016, she invested $38,765 between January and August bringing her total investment to $103,578.
Both plaintiffs have indicated that ‘to the best of their knowledge, that there are no other applicants with a bigger financial interest who are seeking to be the lead plaintiffs.
Bulgaria-based OneCoin LTD, other defendants in the suit include the head of OneCoin Konstantin Ignatov who was arrested earlier this year by U.S. authorities. His sister Ruja Ignatova is pointed as the founder of OneCoin and is also a defendant alongside other officials who actively promoted the scam. Ignatova has, however, been on the run since October 2017 according to a complaint that was unsealed after Ignatov’s arrest.
In June 2019, Ignatov pleaded not guilty to charges of wire fraud, securities fraud, and money laundering, and was denied release on bail. He will consequently have to face trial while in custody despite putting up a $20 million personal recognizance bond. Ignatov was denied freedom while undergoing trial over fears that he was a flight risk.
According to the prosecutors, the OneCoin cryptocurrency scam generated revenues of approximately $3.8 billion from its inception in the 4th quarter of 2014 and the 3rd quarter of 2016.
According to the Department of Justice, OneCoin generated a stunning $3.8 billion in sales between 2014 and 2016. During that time, the Ignatov’s siblings robbed scores of gullible investors out of billions of dollars.
“These defendants created a multi-billion-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.”
Basically, OneCoin pretended to be a crypto company to take advantage of the hype the nascent industry while employing a multilevel marketing structure. In reality, it had very little to do with actual cryptocurrencies.
“This is an old scam with a virtual twist. The cryptocurrency OneCoin was established for the sole purpose of defrauding investors. Ignatov and Ignatova allegedly convinced victims to invest in OneCoin based on complete lies about the virtual currency.”
Within the OneCoin Network, members were prompted to sell educational materials for trading to recruits. These educational materials consisted mostly of content duplicated from online encyclopedia Wikipedia, and tokens which were supposed to be submitted to allow for the mining of Onecoins.