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The Ponzi Scheme. Despite the notoriety of Charles Ponzi, the scheme that carries his name appears to have been first perpetrated by Sarah Howe in Boston in 1879, when she created the “Ladies’ Deposit” to help invest money for women.

When we think about the most noted Ponzi schemes in recent history, we immediately focus on the name Bernard Lawrence Madoff, (now serving a 150 year prison sentence. Eligible for release when he becomes 201 years old) who defrauded investors out of $64.8 billion, but rarely do we think about the others that have perpetrated the Poniz scheme on investors that didn’t make the major headline news that we so focus on.

For this writing, I would like to introduce you to Dr. Ruja Ignatova. Dr. Ignatova was born in 1980 in Sofia, Bulgaria, however her family emigrated to Germany early on when she was just ten years old. She studied Law in University and even earned a PhD from the University of Constance in a dissertation about the conflict of laws.

In 2012 she was convicted of fraud however not much happened as there wasn’t enough evidence or inclination to properly prosecute her. She only ended up with 14 months of suspended imprisonment.

She soon realized that as cryptocurrencies were becoming a thing there might be the possibility to exploit this trend. As an academic, she was well respected in the community, despite her white collar crime, so when she started BigCoin in 2013 she received a lot of support. This turned out to be a scam and quickly shut down.

Finally, she decided to go with the tried and tested Ponzi scheme approach. She set up OneCoin. You could buy packages of one coin which theoretically should inflate in value. Well, where did the money to buy the OneCoin go? All to Ruja. When people wanted to cash out she got more investment to pay back the initial investors as it always goes with a Ponzi scheme. But Ruja was a sensation. So many people wanted to hear her speak.

There were too many problems with OneCoin. First, often it would take a long time to cash out and when you couldn’t you would just get more OneCoin to thank you for the wait. Also, the data was stored in a database instead of the secure blockchain which is usually used. This was just weird and critics started pointing this out.

At this point, governments took serious notice. In September of 2015, Bulgaria’s Financial Supervision Commission (FSC) issued a warning of potential risks in new cryptocurrencies, citing OneCoin as an example. After the warning, OneCoin ceased all activity in Bulgaria and started to use banks in foreign countries to handle wire transfers from participants.

In February of 2016, the a British newspaper wrote that OneCoin is a get rich quick scheme scam and a cult, calling it “virtually worthless.”

The company and the scheme is on the observation lists of many authorities; among them are authorities in Bulgaria, Finland, Sweden, Norway and Latvia. Authorities in many countries have warned of potential risks involved in businesses like OneCoin and undertaken prosecutions against persons linked to OneCoin, including CEO Ruja Ignatova and her brother Konstantin Ignatov.

By March of 2016, The Direct Selling Association in Norway warned against OneCoin, comparing it to a pyramid scheme.

In December 2016, The Italian Antitrust Authority adopted an interim injunction against the company One Network Services Ltd., active in the promotion and dissemination of cryptocurrency OneCoin, and its representatives in Italy, describing their activities as an illegal pyramid sales system, and ordering them to cease promoting and selling OneCoin in Italy.

Also in December of 2016, the Hungarian Central Bank issued a warning that OneCoin is a pyramid scheme. And in China, several members and investors of OneCoin were arrested and $30.8 million of assets were seized.

In February of 2017, after concluding their investigation, AGCM banned all activity on OneCoin until further notice.

In March of 2017, the Croatian National Bank (HNB) advised the public to exercise a high degree of caution in decisions involving OneCoin, noting that OneCoin operations are not supervised by the HNB, and warned that possible losses will be fully borne by the investors.

In April of 2017, Indian police arrested 18 people in Navi Mumbai for organizing a OneCoin recruitment event. The police attended the event undercover to judge the accusations before they decided to act. Further investigation has been started to reveal the higher levels of the pyramid. In May, the investigation recovered Rs 24.57 crores ($3.49 million USD) in nine bank accounts. A further Rs 75 crores ($10.65 million USD) was transferred out before authorities were able to seize it. Beginning of May, two more people were arrested and Rs 24 crores ($3.41 million USD) were seized from bank accounts. A special investigation team was formed with four Assistant Police Inspectors and 15 personnel under Senior Police Inspector Shivaji Awate to follow the money trail for further arrests. Germany’s Federal Financial Supervisory Authority (BaFin) issued cease & desist orders to Onecoin Ltd, Dubai, and OneLife Network Ltd, Belize. The Authority concluded that trading in OneCoins was fraudulently trading. The Bank of Thailand issued a warning against OneCoin, stating it was an illegal digital currency and that it should not be used in trade.

In May of 2017, International Financial Services Commission of Belize (IFSC) issued a warning about OneLife Network Ltd conducting trading business without license or permission from IFSC or any other authority. OneLife Network Ltd was directed to cease and desist from carrying on with the illegal trading business.

In June of 2017, the CEO of OneCoin Ltd. claimed OneCoin was licensed by the Vietnamese government, that it was legally permissible to use them as a digital currency and that it was the first cryptocurrency in Asia officially licensed by any government. The Vietnam’s Ministry of Planning and Investment (MPI) responded by issuing a statement that the document which OneCoin used as proof was forged. They stated that the document was against the MPI regulations and that the person who supposedly signed the document was not in the position claimed by the document at the time when the document was created. MPI warned individuals and enterprises to be vigilant if they encounter the document during business.

In July of 2017, Ruja Ignatova, the CEO, was charged in India with duping investors as a part of the Indian investigation. This is also just about the time that Dr. Ignatova disappeared that evening with $4 billion, never to be heard from again. Leaving people who had put a lot of their livelihood into OneCoin broke.

In January of 2018, the Bulgarian police raided OneCoin’s office in Sofia at the request of the prosecutor’s office in Bielefeld, Germany. German police and Europol took part in the bust and the investigation. Also 14 other companies, tied to OneCoin, were investigated and 50 witnesses were questioned. OneCoin’s servers and other material evidence were seized.

In May of 2018, the Central Bank of Samoa (CBS) banned all foreign exchange transactions related to OneCoin and OneLife. The bank had earlier in March issued a warning about OneCoin. CBS describes OneCoin as a very high risk pyramid scheme.

In November of 2019, the New York Federal Court found lawyer Mark Scott guilty of money laundering and bank fraud for his role in routing $400M out of the US. The BBC published a detailed investigation of OneCoin and Ignatova titled Cryptoqueen: How this woman scammed the world, then vanished. The reporters believe that Ignatova resides in Frankfurt under a false identity. The the BBC published a documentary on her called “The Missing CryptoQueen.”

In 2020 the FinCEN Files showed that BNY Mellon processed $137M for Entities Linked to OneCoin.

To this day, the missing cryptoqueen has yet to be found. Many speculate that she is still living in Frankfurt, Germany under a different identity.