The Central Bank of Samoa says an intelligence report received from a branch of the New Zealand Police labels the cryptocurrency OneCoin a “Hybrid Ponzi-Pyramid Scheme" that has circumvented Samoa’s financial system, implicating a number of Samoans.
Following receipt of the 124 page report from the NZ Police Financial Intelligence Unit, the Central Bank of Samoa says any person, organisation or entity that conducts any cryptocurrency/investment presentations, workshops or dealings without the prior approval of the Central Bank, commits an offence and could be subject to criminal prosecution. According to the Central Bank of Samoa, the NZ Police FIU estimates NZ$3.5 million was transferred out of NZ in the "Hybrid Ponzi-Pyramid Scheme."
Last month the United States Department of Justice announced the arrest of Konstantin Ignatov in Los Angeles on a wire fraud conspiracy charge stemming from his role as the leader of "an international pyramid scheme that involved the marketing of a fraudulent cryptocurrency called OneCoin.” The US DoJ says victims invested billions of dollars worldwide in the "fraudulent" cryptocurrency.
OneCoin says Ignatov has not been formally charged with a crime and is entitled to a presumption of innocence.
Here's the statement from the Central Bank of Samoa.
Beware of OneCoin Operations, Central Bank warns
The Central Bank of Samoa, through its Financial Intelligence Unit, recently received a spontaneous intelligence report from the New Zealand Financial Intelligence Unit (NZFIU) regarding the OneCoin operations. The 124 page Intelligence Report notes the following main elements:
1. OneCoin is labelled as a “Hybrid Ponzi-Pyramid Scheme” because the scam contains ingredients of both types of scams – Ponzi Scheme and Pyramid Scheme.
2. Because of the CBS prohibition on all OneCoin transactions in May 2018, NZFIU have formulated the view that this propelled the financial problem in NZ. That is, OneCoin has circumvented Samoa’s financial system (because of our blockages on all OneCoin transactions at all Financial Institutions in 2018),and have opted to use the NZ Financial System to conduct their businesses and transfers.
3. NZFIU have estimated that $3.5m NZD was transferred out of NZ.
4. The target of OneCoin is through the Churches. There are two large churches that were used in OneCoin operations. These two Churches, although originated in Samoa, have branches in New Zealand and Australia, thereby affecting the Pasefika community. This is why NZFIU have formulated the view that public education on the issue would be futile because the Church Ministers are the promoters, and they are held out to be trustworthy, hence, people of the congregation will follow suit.
5. There are a number of Samoan individuals implicated in the report, and they have conducted transactions using either Samoan, Australian or NZ banks. These individuals are currently under scrutiny and potential investigation. The offence of money laundering is now a maximum of 15 years imprisonment, or a maximum fine of $1 million tala, or a combination of both.
6. Some of our Money Transfer Operators (“MTOs”) have also been implicated, which we will not be naming at present. However, we will be monitoring them closely and considering whether further action may be taken in light of the detailed report by NZFIU, which is a confirmation of the information that we already possess.
7. The Bank Accounts of churches may have also been used as vehicles for these transfers, such as Worship Centre and SISDAC: here in Samoa, New Zealand and Australia. These accounts are supposedly compromised.
Advice to the Public
8. Any person or organization or entity that conducts any cryptocurrency/investment presentations, workshops or dealings without the prior approval of the Central Bank, commits and offence and may be subject to criminal prosecutions and convictions to a fine and/or an imprisonment term.
9. Any of the hotels or organizations that hosts any of these cryptocurrency investments/workshops/dealings without the prior approval of the Central Bank may also be liable as a party to any of these criminal proceedings as outlined in paragraph 8 above.
10. Please contact the Financial Intelligence Unit at telephone numbers 34-121 or 34-194 for any further information on this.
Here's the statement from the US Department of Justice.
Manhattan U.S. Attorney Announces Charges Against Leaders Of “OneCoin,” A Multibillion-Dollar Pyramid Scheme Involving The Sale Of A Fraudulent Cryptocurrency
Current Leader Konstantin Ignatov Arrested at Los Angeles International Airport
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Cyrus R. Vance Jr., the District Attorney for the County of New York, John R. Tafur, the Special Agent in Charge of the Newark Field Office of the Internal Revenue Service-Criminal Investigation (“IRS-CI”), William F. Sweeney Jr., and the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced that KONSTANTIN IGNATOV was arrested March 6, 2019, at the Los Angeles International Airport, on a wire fraud conspiracy charge stemming from his role as the leader of an international pyramid scheme that involved the marketing of a fraudulent cryptocurrency called “OneCoin.”
An Indictment charging IGNATOV’s sister, RUJA IGNATOVA – a founder and original leader of OneCoin – with wire fraud, securities fraud, and money laundering offenses was unsealed yesterday. As a result of misrepresentations that IGNATOV, IGNATOVA, and others made about OneCoin, victims invested billions of dollars worldwide in the fraudulent cryptocurrency. Following his arrest, IGNATOV appeared in Magistrate Court in the Central District of California, and was detained on the charge contained in the Complaint.
Manhattan U.S. Attorney Geoffrey S. Berman said: “As alleged, these defendants created a multibillion-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 more than zeroes and ones. Investors were victimized while the defendants got rich. Our Office has a history of successfully targeting, arresting, and convicting financial fraudsters, and this case is no different.”
New York County District Attorney Cyrus R. Vance, Jr., said: “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. Our Office urges all crypto investors to scrutinize investment opportunities, recognize the prevalence of fraud in this underregulated space, and proceed with caution. I commend U.S. Attorney Berman and my Office’s Major Economic Crimes Bureau for their globe-spanning investigative work and shared commitment to protecting our markets from sophisticated white-collar fraudsters.”
IRS Special Agent in Charge John R. Tafur said: “This is an old scam with a virtual twist. As alleged in court documents, 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. IRS Criminal Investigation is committed to investigating cryptocurrency scams in an effort to protect the American public and bring cryptocurrency crooks to justice.”
FBI Assistant Director-in-Charge William Sweeney, Jr. 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.”
According to the allegations contained in the Complaint charging KONSTANTIN IGNATOV and the Indictment charging RUJA IGNATOVA, and in other court papers, and other documents in the public record:[1]
IGNATOV currently serves as the top leader of OneCoin Ltd., a company marketing a purported cryptocurrency named “OneCoin,” which the investigation has revealed is in fact a fraudulent pyramid scheme. OneCoin Ltd. was co-founded in 2014 by IGNATOVA, and is based in Sofia, Bulgaria. IGNATOVA served as OneCoin’s top leader until her disappearance from public view, in October 2017. Starting in late 2017, IGNATOV, who is IGNATOVA’s younger brother, assumed high-level positions at OneCoin, rising to the top leadership position by mid-2018.
OneCoin Ltd. operates as a multi-level marketing network through which members receive commissions for recruiting others to purchase cryptocurrency packages. This multi-level marketing structure appears to have influenced rapid growth of the OneCoin member network. Indeed, OneCoin Ltd. has claimed to have more than 3 million members worldwide, including victims living and/or working within the Southern District of New York. OneCoin continues to operate to this day.
As a result of misrepresentations made by IGNATOV, IGNATOVA, and other OneCoin representatives, victims throughout the world wired investment funds to OneCoin-controlled bank accounts in order to purchase OneCoin packages. Records obtained in the course of the investigation show that, between the fourth quarter of 2014 and the third quarter of 2016 alone, OneCoin Ltd. generated €3.353 billion in sales revenue and earned “profits” of €2.232 billion.
Among a number of other representations, OneCoin Ltd. has claimed that the OneCoin cryptocurrency is “mined” using mining servers maintained and operated by the company, and that the value of OneCoin is based on market supply and demand. The purported value of a OneCoin has steadily grown from €0.50 to approximately €29.95 per coin, as of January 2019. In fact, the value of OneCoin is determined internally and not based on market supply and demand; and OneCoins are not mined using computer resources. Moreover, the investigation has revealed that IGNATOVA and her co-founder conceived of and built the OneCoin business fully intending to use it to defraud investors. For example, in one email between IGNATOVA and her co-founder, IGNATOVA described her thoughts on the “exit strategy” for OneCoin. The first option that IGNATOVA listed was, “Take the money and run and blame someone else for this . . . .”
Additionally, OneCoin Ltd. has claimed to have a private “blockchain,” or a digital ledger identifying OneCoins and recording historical transactions. The investigation has revealed that OneCoin lacks a true blockchain, that is, a public and verifiable blockchain.[2] Moreover, by approximately March 2015, IGNATOVA and her co-founder had started allocating to OneCoin members coins that did not even exist in OneCoin’s purported private blockchain, referring to those coins as “fake coins.”
As the founder and leader of OneCoin Ltd., IGNATOVA participated in efforts to market OneCoin to U.S. victim-investors. For example, on July 4, 2015, IGNATOVA participated in an online webinar, later posted to YouTube.com, in which IGNATOVA announced the official opening of the United States market for OneCoin.
Since taking over leadership of OneCoin following IGNATOVA’s disappearance from publicly running the company, IGNATOV has himself made false representations to OneCoin members to solicit trader package purchases and investments into the company. For example, IGNATOV has repeatedly represented that an “initial public offering” of OneCoin would occur on various dates in 2018 and 2019, in an effort to generate excitement and solicit additional investments from member victims. However, the purported offering was repeatedly postponed, and no such offering has taken place. Moreover, IGNATOV has been personally involved in manually setting and increasing the purported Euro value of OneCoin, contradicting claims that the value is set by supply and demand. Finally, the investigation has revealed that IGNATOV is aware that OneCoin-derived funds have been routed through a series of purported “investment fund” accounts used to hide the origin of the money, i.e., to launder OneCoin fraud proceeds.
Between February 27, 2019, and March 6, 2019, IGNATOV travelled to the United States to conduct OneCoin-related business, including in Las Vegas, Nevada, where he stayed at a casino resort. While in Las Vegas, IGNATOV met with a number of OneCoin affiliates. During the meeting, one of the first questions posed to IGNATOV was when OneCoin members would be able to monetize, or “cash out,” their OneCoins. IGNATOV reportedly responded, “if you are here to cash out, leave this room now, because you don’t understand what this project is about.”
IGNATOVA, a third defendant, MARK S. SCOTT, and others agreed to launder the proceeds of the OneCoin fraud scheme. Specifically, IGNATOVA, SCOTT, and others agreed with others to conduct transactions involving OneCoin fraud proceeds in order to conceal and disguise the nature, location, source, ownership, and control of the proceeds. SCOTT, a former partner of a major United States law firm, assisted IGNATOVA and others in laundering more than $400 million through a series of purported investment funds holding bank accounts at financial institutions in the Cayman Islands and the Republic of Ireland, among other locations. The indictment charging SCOTT was previously unsealed, and SCOTT was arrested in Barnstable, Massachusetts, on September 5, 2018. SCOTT’s case is currently pending before U.S. District Judge Edgardo Ramos.* * *
IGNATOVA, 38, of Sofia, Bulgaria, is charged with one count each of wire fraud, conspiracy to commit wire fraud, securities fraud, and conspiracy to commit money laundering, each of which carries a maximum sentence of 20 years sentence, and one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison. IGNATOVA remains at large.
IGNATOV, 33, of Sofia, Bulgaria, is charged by Complaint with one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison.
SCOTT, 50, of Coral Gables, Florida, is charged by Indictment with one count of conspiracy to commit money laundering, which carries a maximum sentence of 20 years in prison.
The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Berman and Mr. Vance praised the outstanding investigative work of IRS-CI and the FBI, which jointly conducted this investigation with the Special Agents from the U.S. Attorney’s Office and analysts from the New York County DA’s Office Major Economic Crimes Bureau.
The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit and Securities and Commodities Fraud Task Force. Assistant United States Attorneys Christopher J. DiMase and Nicholas Folly, and Special Assistant United States Attorney Julieta V. Lozano of the New York County District Attorney’s Office, are in charge of the prosecution.
The charges contained in the Indictments and Complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
If you think you may have been a victim in this case or have additional information, please contact the United States Attorney’s Office at 866-874-8900, or by email at USANYS.OneCoin@usdoj.gov.
[1] As the introductory phrase signifies, the entirety of the texts of the Complaint and Indictment constitute only allegations, and every fact described herein should be treated as an allegation.
[2] OneCoin Ltd.’s private blockchain may be contrasted with Bitcoin’s blockchain, which is decentralized and public.
And here's a statement from OneCoin.
Official OneCoin statement regarding publications concerning the arrest of Mr. Konstantin Ignatov on US territory
OneCoin and its affiliates would like to address the recent media reports regarding the arrest of Konstantin Ignatov in the United States of America. We can confirm that Mr. Ignatov is currently in the United States. Based on the information that has been made public by the U.S. authorities, we understand that they are investigating allegations of conspiracy to commit wire fraud.
Mr. Ignatov has not been formally charged with a crime and is entitled to a presumption of innocence. If he is charged, he will have the opportunity to challenge the case before a U.S. court of law. Transparency is one of the core values of OneCoin and we stand firmly behind this belief.
We have always stated our willingness to be open with regulators and the media, and request the same courtesy. We therefore strongly urge the press to refrain from speculation and judgment on the U.S. investigation until more information becomes available
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