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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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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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Jack Dorsey‘s Square to develop open source Bitcoin mining

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Jack Dorsey Bitcoin

On Friday, October 15, Twitter CEO Jack Dorsey announced that American fintech company, Square, would be looking to get into Bitcoin mining. Jack Dorsey who is also Square’s CEO announced this on Twitter which subsequently sent waves through the bitcoin market, surging its price to almost a record high, rising over $62,000 over the weekend. According to the Twitter boss, Square is looking to building an open source Bitcoin mining system that would be available to individuals and businesses.

Sharing his thoughts further on the initiative, he stated that “Mining needs to be more distributed” and that “the more decentralized [mining] is, the more resilient the Bitcoin network becomes. He also mentioned the apparent inaccessibility of mining stating that “Bitcoin mining should be as easy as plugging a rig into a power source.

Dorsey also believes that bitcoin mining “needs to be more efficient and that “clean and efficient energy use” would be undoubtedly beneficial to the digital currency in the long run.

Dorsey ended the thread by saying that a “technical investigation would be undertaken by a Square team led by Jesse Dorogusker, Square’s hardware lead. If successful, this initiative would be another of Square’s bitcoin focused projects which includes a Bitcoin hardware wallet.

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Financial Leaders from G7 Release Guidelines for Central Bank Digital Currency

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Source: World Atlas

At a meeting that was held in Washington, yesterday, October 13, G7 leaders discussed central bank digital currency and endorsed 13 public policy principles with regards to their implementation. The financial leaders from G7 agreed that CBDCs would complement cash and should not be detrimental to the monetary system. The G7 leaders have been discussing CBDCs this week concluding that they should do no harm and meet rigorous standards.

It should be noted that G7 includes finance leaders in advanced economic nations comprising of Canada, France, Germany, Italy, Japan, the U.S and the U.K. the G7 leaders make it mandatory that any newly launched CBDC should not harm the central bank’s ability to perform its duty of maintaining financial stability. In a joint statement by the G7 finance ministers and central bankers, they said that, 

“Strong international coordination and cooperation on these issues help to ensure that public and private sector innovation will deliver domestic and cross-border benefits while being safe for users and the wider financial system.” 

The joint statement further states that CBDCs are complements to cash and could serve as a liquid or safe settlement assets with an added advantage of anchoring existing payment systems. CBDCs issuance should be entrenched in a long-standing public commitment to transparency, rule of law, and sound economic governance. The statement added at CBDCs must be so efficient that they are fully interoperable on a cross-border basis. 

The G7 leaders agreed that they had a duty to minimize the incidence of ‘harmful spillovers to the international monetary and financial system” 

The G7 statement reiterated a similar statement earlier made by G20 that no global stablecoin project should begin operation until such a token has addressed legal, regulatory and oversight requirements. 

Countries like China and Nigeria are ahead of the pack with regards to the adoption of digital Yuan and Naira respectively. China’s crackdown on cryptocurrency may be a step forward for the country’s plan to promote its digital Yuan. Nigeria, on the other hand, postponed the launch of its eNaira in deference to the 61st anniversary of Nigerian independence on Oct 1. 

However, countries like the US and the UK are dragging their foot with regards to the introduction of CBDCs to their financial system. There are insinuations that America is in danger of being left behind technologically and financially if it doesn’t get serious with the implementation of CBDC in its financial system.

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Learning Guides

Understanding Speculation and Crypto Volatility

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Everyone who dabbles in the crypto industry learns almost immediately that the market is very volatile and oftentimes things can change very quickly. That volatility is the fundamental reason why some investors make absolutely stunning gains in so short a time and others lose a lot of money as well. Trading in crypto is one of the riskiest ventures any person can undertake and as they say, it’s not for the faint of heart. The risks can be mitigated of course and sometimes depends specifically on the coin or crypto asset being traded on, barring general market trends.

Nevertheless, to get to the bottom of the volatility concept, one must understand speculation in the market. To start off, the concept of speculation isn’t limited to cryptocurrencies, on the contrary, speculation has existed for as long as economics and trading has. But it is worth saying that speculation is often a feature of novel sectors, assets, commodities and the like. So, even though cryptocurrencies have been around for more than a decade, they’re still in their infancy as far as markets go. One could say that the market is still trying to find its feet.

One of the fundamental reasons why cryptocurrencies are so volatile is that they are fundamentally backed by nothing of value outside the attention that they get. Unlike many fiat currencies which are either pegged to another currency’s value or whose value is unilaterally determined by a central authority, cryptocurrencies only derive value as a function of how many people are willing to use is to transact, i.e. trust in the asset because other people trust it. As a rule of thumb, the larger the number of people who accept the asset, the more valuable it becomes.

This is one of the hallmarks of speculative trading. In the crypto world or in any market that’s novel and untested, many people are in it to win it which means their strategies in trade has the objective of making as much profits as possible in the short term. Therefore, the market enters a subtly dangerous cycle of rapidly changing prices of assets. Basically, investors typically buy assets when prices are low and wait. As more investors are attracted to the commodity for its low prices, it sets off a cascade where more people buy in, causing the price to steadily rise. 

However, all good things must come to an end and it almost always gets to a breaking point whereupon the price gets high enough for investors to begin to sell. This reverses the earlier cascade and as more and more investors pull out, the prices can fall dramatically causing even more to sell off in fear of losing whatever investments they have left. The prices having fallen resets the game and primes investors to begin buying again.

Volatility has been one of the talking points of many critics of cryptocurrencies often comparing it to a Ponzi scheme. And in certain cases, persons of interest with large pulls and audiences can substantially affect the rate at which prices rise and fall. Other factors include government regulations. Volatility at its core reflects the often chaotic nature of trade and market interactions and human hopes and fears.

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