Three Key Crypto Lessons Investors Can Learn from the OneCoin Scam

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Scams are commonplace in the crypto world. But OneCoin is arguably the most successful cryptocurrency scam in history. Between 2014 and 2016, the project raised $4 billion from investors based around the world. Despite the fact that it has never even been listed on a stock exchange, it has attracted money from almost every nation you want to mention.

Its co-founder Ruja Ignatova, aka “Dr. Ruja”, disappeared without a trace in 2017 after spending millions of dollars from her investors on luxury apartments and other assets. Its co-founder Sebastian Greenwood was jailed for wire fraud in the US, while Dr Ruja’s brother Konstantin, later CEO of OneCoin, was also put behind bars.

Years later, police around the world are still pursuing OneCoin executives. It may take them decades to find them all.

But this remarkable story – soon to become a major Hollywood movie starring Kate Winslet as Dr. Ruja – has some important takeaways for crypto investors who want to learn how to spot a scam.

In the world of crypto, if anything looks like an MLM scam… it probably is

Contrary to what crypto naysayers say, this is not a pyramid scheme. Last month, an FT contributor wrote that “calling Bitcoin a Ponzi scheme” was “arguably too nice”. But what the FUD brigade misses is that cryptocurrencies are the product of blockchains, which are immutable and unmodifiable in nature – due to the fact that they don’t exist on a single database, but rather on a shared network that continues to exist even if an individual node goes offline.

Blockchains are a powerful financial tool: they are perhaps the ultimate accounting tool, in fact, because anyone in the world with access to the internet can examine all transactions taking place on it at any given time. With the exception of private coins like Monero, you can see how many tokens an individual wallet has, when coins left a wallet, where they went, and more.

A multi-level marketing (MLM) scam operates in the shadows, using fabricated records or inaccessible ledgers – much like OneCoin, which kept much of its accounting secret and didn’t even have a blockchain.

The story continues

Instead, the sum total of his bookkeeping appears to have been done on a bunch of PCs in a small office in Sofia, Bulgaria, which was hastily emptied one day in 2019.

In the world of genuine crypto, no one will ever try to “recruit” you. There are no ‘membership tiers’, you don’t get ‘referral bonuses’ or ‘guaranteed returns’ on genuine exchanges. Of course, some protocols occasionally offer airdrops and exchanges offer promotional gifts. But there is a clear line between marketing and the extravagant promises of MLM. When a “crypto” project starts trying to trick you into tricking your friends and loved ones into “joining” something or the like, it’s almost certainly a wolf in sheep’s clothing.

If someone tells you that their project is the “next bitcoin”, run the other way!

It’s June 11, 2016. In London, “Dr. Ruja” takes the stage at Wembley Arena, the UK’s top concert venue. Flames leap from the stage as she enters, while Alicia Keys’ “This Girl Is on Fire” blares over the PA system. Wearing a flowing red dress, Dr. Ruja tells the enthralled audience that OneCoin’s market capitalization is now second only to Bitcoin. In fact, she says, her protocol is the “Bitcoin Killer.”

“We don’t have much to do,” she enthuses. And if everyone continues to invest their money, “in two years, no one will be talking about Bitcoin.”

While there is undoubtedly some competition between crypto communities, there are people who are only interested in bitcoin like Twitter founder Jack Dorsey and Ethereum advocates who champion their favorite coin among all the others. But when it comes to token founders, animosity is rare. Even crypto celebrities like Ethereum co-founder Vitalik Buterin and Binance Coin founder Changpeng “CZ” Zhao have admitted to holding Bitcoin and other tokens.

Solana is touted by proponents as an Ethereum “killer,” but protocol co-founder Raj Gokal has shunned that kind of label.

True high-value protocols aren’t interested in being the only show in town. There is plenty of room in the industry for successful protocols and those trying to “catch” BTC and others are likely making outlandish promises aimed at nothing more than lining their pockets with your money.

Beware of charismatic “leaders” – and remember that crypto is supposed to be decentralized

Dr. Ruja was apparently the perfect antithesis of the Vitalik Buterins of this world. While the latter is an intellectual, discreet, nerdy and intellectual type, Dj. Ruja was the opposite: she was the last word in charm.

And while Buterin is just a cog in the Ethereum machine, Dr. Ruja was anything but. She actively sought the limelight, making incredible promises of fabulous wealth.

But in the real crypto sphere, that kind of focal point is almost always a bad sign. Crypto’s main selling point is its decentralized nature – a factor that makes a protocol almost indestructible after reaching a certain size. The less you hear about a protocol’s founder, and the more you hear about a large community of busy developer projects to improve the network, the better.

Few people have dug up as much dirt on this scam as British journalist Jamie Bartlett – the creator of OneCoin’s most famous expose to date: the BBC’s “Missing Cryptoqueen” podcast. Summarizing Dr Ruja, Bartlett wrote that “most frustrating of all, she guessed correctly that by the time we realized [the extent of her scam]she would have left, with the money.

This article originally appeared on FX Empire

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