Anatomy of a crypto con (review of The Missing Cryptoqueen by Jamie Bartlett)

OneCoin’s just the latest chapter in the never-ending story of fools being parted from their money.

It’s estimated that a million people were conned in the $4 billion global Ponzi scheme.

OneCoin was dreamed up by Ruja Ignatova, an Oxford University graduate and two-time Bulgarian Businesswoman of the Year who’s fluent in five languages.

Ignatova pitched OneCoin as a world-changing cryptocurrency for the masses. She promised it would be bigger and better than Bitcoin.

The original plan was to have 2.1 billion OneCoins in circulation – 100 times the number of Bitcoins. But just 18 months later, Ignatova announced at a sold-out corporate event in Wembley Arena that there would now be 120 billion OneCoins. The coin would still be worth just shy of $10 CDN. And every investor who got in early was having their OneCoins doubled in a show of appreciation.

“With the click of her fingers, Dr. Ruja doubled the wealth of every single person in the crowd,” says Jamie Bartlett, tech journalist and author of The Missing Cryptoqueen. “Not to mention the hundreds of thousands of investors who hadn’t made it to London. It didn’t seem to matter that she was breaking rule 101 of economics: that when the supply of something goes up, the price goes down. Nor did it matter that she was breaking her own promise: that there would only ever be 2.1 billion OneCoin in circulation and that ‘fixed supply’ was the whole point of cryptocurrency. So how was it possible to increase the number of coins by a factor of 50? And without affecting the price?”

Ignatova pulled off this magic trick because she was running the biggest scam of the 21st century, says Bartlett.

While there were other cryptocurrencies, OneCoin was the first to embrace multilevel marketing. Promoters were paid generous commissions for selling the coin and signing up family, friends and strangers to do the same.

“The single most important word in multilevel marketing is momentum,” says Bartlett. “It happens when a team is big enough to start growing by itself, just like when a virus reaches an unstoppable tipping point. Most new MLM companies never reach that moment and peter out within a year or two.”

Instead of selling coins, promoters sold education packages at different price points. The packages came with training videos, a plagarized PDF and free tokens that would someday soon be converted into OneCoins. The starter package, which cost just over $150 CDN, came with 1,000 tokens. The “Tycoon Trader” package sold for nearly $8,000 and included as many as 48,000 tokens.

A blockchain was needed to convert the tokens into coins. Think of this specialized piece of software as a public diary for each coin that lists every transaction and continually updates itself every few minutes.

OneCoin never built a real blockchain. A fake one was posted on its website. Ignatova made up the price and no coins were ever traded. “OneCoin’s blockchain display looked like the real thing but it was some kind of pre-programmed ‘script’, an off-the-shelf piece of kit that was running phoney and meaningless transactions between imaginary wallets,” says Bartlett.

“The display was just a clever ruse to fool investors into thinking their coins were held on a brand-new mathematically secure state-of-the-art blockchain. But all they owned were meaningless entries on a database. A million people had bought Ponzi tokens. Monopoly money that was controlled not by computer code, but by Ruja.”

Momentum eventually stalled, top promoters bailed, OneCoin was exposed as a scam and the pyramid scheme collapsed on itself, says Bartlett. Investors lost their money and life savings. Senior executives went to jail. And Ignatova, who’s one of the FBI’s ten most wanted fugitives, has been on the lam since 2017.

“Good scams aren’t about facts or logic,” says Bartlett. “They are built on the manipulation of common human irrationalities: hope, belief, greed and, above all, by the nagging ‘fear of missing out’. Although OneCoin investors were victims, they weren’t entirely without blame. FOMO is driven by a desire to get rich quick, a willingness to replace work or effort with a risky bet.”

If you’re looking for a safe bet, bank on a future scam that dwarfs OneCoin and parts even more fools from their money. It’s the story that never ends.

Jay Robb serves as communications manager for McMaster University’s Faculty of Science, lives in Hamilton and has reviewed business books for the Hamilton Spectator since 1999.

Published by

Jay Robb

I've reviewed more than 500 business books for the Hamilton Spectator since 1999 and worked in public relations since 1993.

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