Shubh Patni
Shubh Patni

Shubh Patni

Crypto Scam Worth $15 Billion, Shook the Whole Industry

How a Ph.D. fooled the entire world

Shubh Patni's photo
Shubh Patni
·Aug 1, 2020·

6 min read

Crypto Scam Worth $15 Billion, Shook the Whole Industry

Photo by Bermix Studio on Unsplash

One of the biggest scams in history — The Times

Before the unprecedented crypto boom of 2017, there were only a few people who knew about cryptocurrency and blockchain. Bitcoin which was and still is the biggest and best-known cryptocurrency was rising in value every day. From a few cents, it had grown to thousands of dollars per coin.

Investors from all over the world wanted a piece of the pie, no one wanted to miss this once-in-a-lifetime opportunity. During that time, altcoins were being developed mostly on top of Bitcoin. Very few people in the world knew about blockchain in technical terms, the underlying technology behind cryptocurrencies. Everyone else looked at it as a ‘get rich quick' scheme.

It was 90s all over again. No one knew what was happening, what they were investing in, and if at all it was real.

Most altcoins were fake. They just had a cool-looking website and a motto of destroying bitcoin. These coins were breathing off the success of bitcoin and had no underlying technology such as blockchain. Their creators wanted to raise money quickly and ‘fake it till you make it’ was the norm.

One such altcoin that gained a lot of attention was One Coin.

One Coin

One Coin was founded in 2015 by Dr. Ruja Ignatova. Dr. Ruja claimed One Coin to be better than Bitcoin. In one of her conferences, she shouted, “In two years, nobody will speak about Bitcoin any more!”. Because of her high profile, intelligence, knowledge, and network, people believed in One Coin.

By now you must have realized that all these were lies made in public conferences. In fact, One Coin had no underlying technology, there was no blockchain.

In early October 2016, almost 2 years after One Coin was released, Bjorn Bjercke was offered a job as a CTO of One Coin. He was shocked to know that a so-called cryptocurrency company has been running for 2 years without blockchain.

Now, let’s talk about numbers.

Screenshot 2021-07-29 at 10.00.32 PM.png

As I said earlier, most of the investors had no idea what they were investing in, they just cared about the numbers on their screens go up.

Investors who bought One Coin could see its value growing with time on One Coin’s website. One such investor was Jen McAdam, who invested €10,000 of her own and persuaded her friends and family members to invest €250,000 in total. She was excited to see her €10,000 turning into €100,000 in no time.

Many investors like her, 3 million to be more precise, invested in One Coin hoping to see good returns. Within 3 years, according to the graph above, more than €4 Billion was invested from countries all over the world. Some people say, in reality, it was €15 Billion.

The Founder

ruja ignatov.jpg Source: BBC

To everybody who tells me, did I violate the cryptocurrency philosophy, guys, we are the biggest cryptocurrency community. We decide on the philosophy of cryptocurrency. — Dr. Ruja Ignatova.

Dr. Ruja Ignatova was born in Sofia, Bulgaria. She emigrated to Germany with her family when she was 10. In 2005, she earned a Ph.D. in European private law from the University of Constance. She also claims to have studied at Oxford University. She previously worked in the McKinsey group, which is a very exclusive global consulting group.

In 2012, Dr. Ruja was convicted of fraud in Germany in connection with her father Plamen Ignatov’s acquisition of a company that was later declared bankrupt in doubtful circumstances.

Dr. Ruja was considered extremely knowledgeable and intelligent. She believed that banks and governments have too much power in terms of controlling currencies. She blamed large banks for the financial crisis of 2008, which by the way is correct. Thus people believed in her and were willing to follow her. Dr. Ruja proclaimed that old systems and institutions were outdated and One Coin will be the future.

In October 2017, after One Coin accumulated around €15 billion, Dr. Ruja goes missing. She was supposed to speak at a conference in Lisbon, but she didn’t show up. Some believed large banks kidnapped or killed her, or she was hiding from them.

After her disappearance, her brother took over the One Coin empire. In 2019, the FBI arrested him for money laundering and fraud.

How €15 Billion Was Generated

One Coin was not a cryptocurrency, there was no blockchain. So how it generated so much money?

One Coin was a multi-level marketing scheme. Here is a good post by Lindy on MLMs.

One Coin utilized MLM to grow its network. They sold educational packages that contained tokens to allow you to mine One Coin. These educational packages would teach you how to become financially free. There were courses related to IPO, investing, etc, but obviously, they were plagiarized.

Screenshot 2020-07-13 at 11.40.21 PM.png One Coin Products

People were recruited to join the network using MLM marketing. People at the top would recruit their relatives or friends, and then they would recruit others, and so on. For each recruitment, a cut of the purchase would go up the ladder to each person. The problem is, this sort of marketing creates no value. As we know, One Coin used educational packages to hook people, so if you convinced your friends to purchase one package, you would get a commission and this is how people made money.

Money that was used to make these educational purchases would get converted into One Coin, and later the cryptocurrency could be converted to Euro.

But there was no exchange. One Coin always delayed the release of their exchange, and investors got more and more concerned. This issue was to be resolved at a conference in Lisbon, but Dr. Ruja didn’t show up.

Some people sold their houses as One Coin seemed promising. They didn’t want to lose another opportunity they had lost with Bitcoin.

One Coin had become a cult. People were so optimistic about it, they wouldn’t listen to anyone’s opinion. It gave them a promise of a better, financially free, and democratized future.

The charismatic personality and qualifications of Dr. Ruja made her unquestionable. People refused to believe in any other opinion, they thought it to be tricks played by the government and big banks.

Timothy Curry, a Bitcoin enthusiast, and cryptocurrency advocate tried to warn people about One Coin. He told Jen McAdam that it was a scam. She refused to believe at first, to the point that she started screaming at him for interfering with her decisions. After three months, when McAdam checked all the facts and questioned leaders at One Coin, it was clear. It was a scam!

Here is the video of Jen McAdam and Timothy Curry

 
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