The Zhuzhou County Procuratorate in Hunan Province, China has arrested and prosecuted 98 people associated with the OneCoin cryptocurrency pyramid scheme, and has recovered CNY 1.7 billion (approximately USD 266 million at time of writing) in the process. This is the largest number of people involved in an investigation and the largest amount of economic loss recovered by the agency.
OneCoin is a global pyramid scheme based out of Copenhagen, Denmark. In China it is called Weika Coin. OneCoin generated huge outflows of capital from 20 different Chinese provinces, with 2 million registered accounts in China. Investors in China collectively put over CNY 15 billion into the scheme. Most of this money exited China and went to people in foreign countries at the top of the pyramid scheme, seriously endangering national financial security and stability.
The OneCoin organization claimed that it was a second generation of cryptocurrency after Bitcoin and already had a huge following, and promised tremendous returns for investors. It was impossible to view the inner-workings of OneCoin without buying a non-refundable starter package, the least expensive of which cost EUR 130 and the most expensive a whopping EUR 36,330.
When purchasing OneCoin a user receives tokens that have no value, and they can submit these tokens for “mining” where the tokens eventually become OneCoins. This isn’t true cryptocurrency mining where a user is rewarded for putting their computing power towards maintaining and securing the network. There is no evidence that OneCoin ever had a blockchain to maintain and secure, and the inner-workings of the “mining” process were secretive.
If a user received OneCoin from “mining” – itself no guarantee – these could be traded for EUR on a private exchange on the website up until January 2017 when the exchange shut down without notice. Once the exchange shut down, there was no way to recover any money since it was exchanged nowhere else, unravelling the scam.
OneCoin was a classic pyramid scheme where users would get other people to invest and receive EUR referral rewards for doing so. These rewards were paid from other investments, so OneCoin did not have enough money to cover all of its balances. There were also strict selling limits for OneCoin preventing people from cashing out too much at once. Eventually, withdraw requests exceeded the amount of money OneCoin had in its bank and the pyramid collapsed.
Numerous countries besides China have opened investigations and taken legal action against the founders of OneCoin, as well as the people who helped the OneCoin Ponzi scheme proliferate by getting other people to invest. The OneCoin website has remained offline. Its founder, Ruja Ignatova, is facing criminal charges in multiple countries but has disappeared.
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