We used to think that the Madoff Ponzi scheme where billions were lost was the worst investment scam ever. That was until the OneCoin Ponzi scheme was taken down. We were reminded of the OneCoin scheme because an article in Bloomberg reported the sentencing of the “cryptoqueen” sidekick, Karl Greenwood to 20 years in prison. We find it interesting that the OneCoin scam was largely ignored because it happened as crypto was going up and up in price. The FTX mess happened during crypto winter when crypto losses were huge and got a lot more attention. In many ways the OneCoin Ponzi scheme was worse than Madoff’s or the losses sustained by FTX investors.
What Was OneCoin?
OneCoin was a story. It was promoted as a cryptocurrency that was going to compete with or even surpass Bitcoin. The problem, as noted by Judge Ramos in Greenwood’s sentencing was that there was no blockchain, no crypto token, and no market for trading OneCoin. There was a complicated scheme that drew in three and a half million people worldwide. The scheme made 2.93 billion euros in profits from 2014 to 2016 on 4.3 billion euros in revenue via a multilevel marketing setup. OneCoin operators paid millions in commissions to recruiters who convinced those three and a half million people to buy OneCoin which did not exist.
Beware of Fancy Crypto Promotions
As OneCoin made money, the founders of the scam traveled around the world promoting it. The head of the operation was the so-called “cryptoqueen.” That was Ruja Ignatova who has disappeared and is on the FBI most wanted list. Her partner in crime was Karl Sebastian Greenwood who was just sentenced and said to have gotten $300 million for his efforts. Judge Ramos compared OneCoin to the Madoff Ponzi scheme in Greenwood’s sentencing. He noted that most of Madoff’s clients were wealthy individuals with investing experience. But the victims in the OneCoin Ponzi scheme were average people with little investing experience and no experience in the then-new world of cryptocurrencies. The whole thing reminds us of celebrities with no real investing experience telling their followers to buy crypto.
The Madoff scam is commonly said to have taken more than $100 billion from its victims while the OneCoin scam “only” took about $4 billion. However, much of people’s losses in the Madoff scam were “paper losses.” They stayed invested with Madoff because he kept sending them fake reports of more and more profits. What people initially lost was about $20 billion. And much of that was eventually recovered. That is because Madoff had a real business. He invested. He started to fake the reports to his clients in order to cover his losses. This is in stark contrast to OneCoin where the only business was the infrastructure of the con game that stole 4 billion euros over just a few years.
The vast majority of people who put money into OneCoin and thought they had the next Bitcoin will not get anything back. When people like Greenwood who still had assets left over are forced to pay something back it is only a fraction of what was stolen. However, if someone spots the “cryptoqueen” and turns her in, the reward for information leading to her capture is $100,000.