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The Story Of The Biggest Cryptocurrency Scam In History

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OneCoin's Ruja Ignotova

Ruja Ignotova. For victims of the OneCoin scam, this name is one they wish they never heard, but ironically, it was once music to their ears. Four years ago, they would give her a standing ovation and name her the “crypto queen”, as she was about to make them a ridiculous return on investments.

Dr Ruja Ignotova, a Bulgarian, was the founder of OneCoin. A charismatic 36-year-old at the time, she began a movement that will have hundreds of people rallying round. Ruja founded OneCoin on the same philosophy of a decentralized currency that gave people control, and openly threw shots at traditional financial institutions whilst blaming them for the 2008 global financial crisis.

Ruja wasn’t just a random self-proclaimed financial messiah, she had the credentials to back her claims. An Oxford graduate, a Doctorate in Law, and a former Mckinsey employee, Ruja was known to easily run circles round top bankers. In addition, she had the charisma and a commanding persona that sealed the deal.

OneCoin’s growth was rapid. Within a few years of its launch, it already had over 3 million investors across the globe. Conferences and seminars were held from the UK to the US, and even Africa. It was gradually becoming a juicy investment. But by 2017, the truth will begin to surface.

How did she do it?

Ruja claimed OneCoin worked like any other cryptocurrency. It was connected to a blockchain, and could be used for payments. But in fact, it wasn’t. OneCoin was not even a cryptocurrency. It was just OneCoin, a name and nothing more. So why did they believe her?

Dr Ruja was clever. Her plan to get people to invest in something that was non-existent, was creative. 

The currency was sold in the form of educational packages. These educational packages came in different prices, ranging from $100 to $118,000. They contained courses on financial education. Most of the materials were actually plagiarised from other sources. 

The buyers were told that the money used in buying the packages would be converted to OneCoin, which had a value that had huge prospects of skyrocketing.

READ ALSO: Bitcoin And Crypto Scam: Why Africansʼ Skepticism Is Justified

The process that allowed people to change their coins into fiat currency was always under construction. There were endless delays. 

The information about OneCoin could be easily questioned by any investor, but the way Ruja presented the “life changing” investment is what got people going, enthusiastic to tell friends and family about the new opportunity to be wealthy.

OneCoin investors were like a community of people or family, if you may. Once investors come onboard they are added to WhatsApp groups and given inside information about the crypto. It was an “Us” versus the outside world set up that made people feel safe and a part of something big. It was almost like a religion. Members had greeting codes and the slogan: ” One Coin One Life”. 

Multi Level Marketing 

What other way to get people to invest in a communal way than multi level marketing. Multi level marketing essentially uses referrals. One person recruits someone who then recruits someone else and the loop continues. MLM (Multi Level Marketing) isn’t illegal, but it’s a legal means to an illegal end. In most cases, there isn’t really a product to be marketed. People just pay to join the network and a select few at the top actually make money.

Dr Ruja used MLM to peddle her fraudulent package. An article on BBC reported that Ruja contacted Igor Alberts, who became a millionaire through MLM, alongside other powerful MLM agents with enough downlines to generate her expected revenue. 

OneCoin quarterly revenue
OneCoin’s quarterly revenue (BBC)

It worked. Some think it worked better than Ruja imagined. Igor, who was also oblivious to the fact that he was helping brew a multibillion dollar scam, generated € 1 million on OneCoin every month. According to Igor, “I did the calculation on how many coins we needed to become the richest person on the planet. When this coin goes to €100 and we have 100 million, we are richer than Bill Gates”. 

Igor unwittingly convinced innocent individuals to part away with their hard earned money. 

The Damage

The victims of Ruja’s plot will, till this day, find it difficult to recover from the assault on their financial wellbeing. Jen McAdams, who invested €10,000 of her own money, convinced friends and family to invest. The total amounted to €250,000.

READ ALSO: Senegal’s Digital Currency eCFA: Four Years in Retrospect

According to interviews and an article on the BBC website, when Jen saw the value of her OneCoin rise, she planned vacations and shopping sprees. 

In Uganda, Daniel, a 22 year old, gathered 700,000 shillings ($250) to buy the starter package. Raising the money took the assistance of Daniel’s parents. For a family living solely surviving off proceeds from peasant farming, $250 will most definitely leave a void in their wallets. 

Where is Dr Ruja?

Ruja Ignotova – OneCoin's Founder
Ruja Ignotova (OneCoin’s Founder)

Dr Ruja Ignotova was to have another one of her charisma dripping, spirit lifting conferences in Lisbon, Portugal, in October 2017, when she didn’t show up. 

While Dr Ruja remains at large till this day, some of her associates have been apprehended by law enforcement agencies. Co-Founder, Sebastian Greenwood, was charged with fraud in early 2018. Konstantin Ignotova, who took the reins after Raja’s disappearance, confessed that his sister created the scheme for the sole purpose of defrauding innocent people. Konstantin now faces a 90 year sentence.

The United States Justice Department describes the scheme as “an old-school pyramid scheme on a new-school platform”. This type of scam isn’t  unheard of, it’s almost a textbook procedure scam. 

Perhaps, Dr Ruja was able to leverage people’s desperate quest for wealth. Her use of emotions to get through to her unwitting investors is seen in her charismatic and optimistic speeches. 

“In two years, nobody will speak about bitcoin anymore”. Dr Ruja said this at one of her many conferences.

Lines like this reassured investors that they had struck gold and were about to become very rich. 

Another factor could be OneCoin’s branding, there was a face to it, there was a reference point to it. Ignotova created a brand culture, a community of people with similar ideologies— a feat that takes top brands years to achieve. Although there wasn’t a physical coin in sight, there was Dr Ruja Ignotova. Ignotova was OneCoin. 

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Decentralize Daily

From Crypto and Blockchain to AI, Fintech and Web 3.0 delivered twice in a week (Mondays and Fridays)

Bolu Abiodun is a recent graduate of Theatre and Media Arts, Federal University Oye-Ekiti. A journalist with over a year's experience on the job. A former editor at American Media company Project Forward, he is a skilled content creator, social media manager and digital marketer.

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Crypto Assets

Crypto prices drop as global market fear increases

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Top cryptocurrency prices have fallen amidst a drop in stocks and fears over China’s Evergrande debt crisis. In the last 24hour, Bitcoin dropped from $47,772 to $42,630 shedding about 8.58%. this is the lowest in price since another bull run began on Sept 5 after the April crash.

El- Salvador’s President, Nayib Bukele sees the fall as an opportunity to invest more. Recall that the country adopted Bitcoin as a legal tender on September 7. Despite the adoption, the price of Bitcoin has fallen by almost 14% since then.

Other coins have experienced dramatic crashes within the last 24hours. Solana, a coin that has experienced 355% growth within the last 3 months fell from $162 to $130 shedding about 11.39% within the last 24hours. Solana’s fall may be categorized by the 17-hour outage which the founder, Anatoly Yakovenko said was caused by bots “flooding the networks”

Ethereum fell by 9.37% while Dogecoin and Axie Infinity fell by 11.22% and 14.14% respectively within the last 24hrs hours. While crypto experiences dark Monday, El-Salvador keeps investing more money in Bitcoin.

A look at the global market

The global market is experiencing fear due to the Evergrande debt crisis. A report published by the University of Michigan shows that consumer’s sentiment is beginning to decline. This trend alone may impact the crypto market as well.

On the other hand, the global market downturn must have been spurred by the Evergrande debt crisis. The company grew to be one of China’s biggest companies by borrowing more than $300bn. Last year, Beijing made rules to control the debt owed by big real estate developers. This led Evergrande to offer its properties at major discounts to raise more money to keep the business afloat. Right now, the company is struggling to meet the interest on payment of debts.

Why would it matter if Evergrande fails?

The collapse of the multi-million dollars company would affect the global market; including the crypto market. Many people bought properties from Evergrande and they expect to make gains. If Evergrande falls, crypto investors will be forced to withdraw more money to keep their business running without the means to invest more. When one business fails, the other gets affected indirectly. This also applies to other firms that do businesses with Evergrande.

The potential impact on China’s financial system is another effect of Evergrande’s fall. In his statement to BBC, Mattie Berkink, the Economist Intelligence Unit (EIU), said that “the financial fallout would be far-reaching. Evergrande reportedly owes money to around 171 domestic banks 121 other financial firms” if the company fails, other lenders or businesses may be forced to lend less. Thereby leading to a credit crunch- a situation where companies struggle to borrow money.

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Bitcoin in Africa

The rise of CBDC in African economies

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Many nations have taken cues from the world of crypto and its resounding successes over the last decade. In order to avoid getting left behind, governments worldwide are increasingly turning their attention towards implementing some form of digital currency, a CBDC which in full is Central Bank Digital Currency. Although inspired by cryptocurrencies, CBDC’s are quite different from traditional crypto platforms. The main differences are that CBDC’s are unlikely to be decentralized, the supply of this currency regulated by the host’s country’s central bank as the CBDC is designed to operate as a sovereign legal tender, the digitized form of the host country’s fiat currency. Thus, a central bank may issue digitized tokens of its currency of which their value is pegged to the fiat currency of the nation in question, making CBDC’s stablecoins.

Africa has seen a rise in the use of cryptocurrencies and it’s still pushing frontiers in this sector. Although the use of crypto in many African nations is becoming more and more pervasive by the day, the tone of governments in many of these countries toward the sector is cautious at best and threatening at worst. However, a few nations have voiced interests in creating digitized versions of their legal tender to function as a CBDC. Amongst these are Ghana, Nigeria, Morocco, Kenya and Tunisia.

Many of these projects are still in the research phase or developmental phase however. A good example is Ghana’s proposed CBDC, the E-cedi being developed in partnership with German company, Giesecke + Devrient. Nigeria’s CBDC project, the eNaira has been announced and according to Nigeria’s central bank, this CBDC will be launched sometime in 2021. To that end, the CBN has partnered with fintech company, Bitt Inc. to serve as the technical partner in the eNaira’s development. Reportedly, the CBN had made the decision to digitize the Nigerian Naira in 2017.

While the pursuance of digital currencies in African nations is a welcome development, implementation of these schemes isn’t without challenges. Chief among the issues countries in Africa face would be the already existing financial service inequality and poor penetration of internet access in the continent. These challenges must be tackled in order to allow for mainstream adoption of CBDCs and the subsequent provision of financial inclusion. The benefits largely depend on the peculiarities of the nation deploying them. For instance, a digital currency is thought to help Nigeria increase foreign remittances, it’s second largest source of forex after oil. Whatever the outcome of these projects, it is becoming apparent that CBDC’s have come to stay.

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Bitcoin trades above $51k ahead of El Salvador’s adoption

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Bitcoin growth

Bitcoin price has rallied above $51,000 ahead of El Salvador’s adoption. The immediate surge in price may be due to the social media campaign that everyone should buy sats of Bitcoin to support El Salvador’s plan to make the coin a legal tender or it may be due to the news of El Salvador’s adoption of the coin as a legal tender on September 7. Users of social media platforms like Twitter and Reddit are discussing how they will buy Bitcoin of $30 each to mark the new El Salvador Bitcoin law.

The surge in Bitcoin’s price began in the last 24hrs with the price rallying around $51,955 with a 3.37% increase. This is an all-time high after the April crash that brought the price of Bitcoin from $64k down to $28k. The move by El Salvador to be the first country that accepts Bitcoin as a legal tender and the social media campaign that leads to a surge in price ahead September 7 are a repetition of events that occurred late last year and early this year with regards to institutional investors and how the price of Bitcoin skyrocketed.

El Salvador, a country in Central America, has been preparing heavily to adopt Bitcoin by installing ATMs to allow citizens to convert the token into US dollars. Last week, the country’s Legislative Assembly passed a law to allow for the creation of a $150m Trust to support the conversion of Bitcoins to US dollars.

To promote the use of Bitcoin, the government states that it will give the adult population of El Salvador $30 in Bitcoin once they download “Chivo” the wallet issued by the government. This was confirmed by the Finance Minister, Alejandro Zelaya.

What this means for Bitcoin investors

Apart from the adoption by Salvadorians, on-chain analytics show that Bitcoin is in high demand. The fourth halving that occurred will make Bitcoin become a scarce token in the nearest future. Thereby increasing the price sporadically.

With El Salvador’s interest in Bitcoin, other countries are likely to follow suit- Panama is considering following El Salvador’s lead. History will repeat itself as this development will serve as another crypto rout that occurred early this year when Tesla and MicroStrategy announced their support for Bitcoin.

El Salvador’s new law allows the use of Bitcoin as a legal tender it can be used to buy goods, pay for taxes and bank loans. This means more demand for Bitcoin, with the fourth halving that occurred, it means less supply. A common rule of economics for demand and supply will apply. Prices are projected to keep rising. At the time of writing this report, Bitcoin is trading at $51,839 with a projection of $52k before the end of today and higher tomorrow when Salvadorians begin to use the token.

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