- About 60% of deposits came from China, but buyers came from virtually every corner of the globe
- The money was funnelled to offshore accounts and even a bogus deal for an oil field in Madagascar
A Bulgarian high-tech company with global outreach and two billion euro in annual revenues. You never heard of it? If so, you are probably lucky.
OneCoin, the company in question, is one of the biggest international scams. Disguised as a cryptocurrency, it has swindled hundreds of thousands of faithful believers in the miracle of bitcoin. For only three years - between 2014 and 2016 - the Ponzi-like scheme attracted more than three billion euro from 2.1 million active members. And when the law enforcement agency in the US, Germany and China began looking at OneCoin in 2017, its founder Ruja Ignatova vanished like a character from a good-old caper movie.
Ruja Ignatova, Dr Ruja as she is known among the OneCoin believers, first gained notoriety in Bulgaria in 2015 with her lavish parties and expensive purchases of emblematic buildings in Sofia. The Krim restaurant on Slavyanska Street - a lifestyle fixture in Bulgaria's capital - was acquired for 4.2 million euro by one of her offshore companies, while Dimitar Mollov's house across the street from the National Assembly (the Parliament) was bought for 5 million euro. The former was to become her personal residence, while the latter was planned to be the headquarters of her cryptocurrency company, OneCoin.
As it turned out several years later, both purchases were just pocket money for her. The value of the two property deals amounted to about 0.3% of OneCoin's revenue (and that is only until September 2016). Even with other trophy purchases, such as the company´s central office on Sofia´s Slaveykov square, a mansion in the seaside town of Sozopol and a luxurious yacht docked near it, the total amount invested would barely reach 1% of OneCoin´s astronomical revenue - money that was taken from millions of users from around the world under the pretext of selling "educational packages" to them.
Riding the wave of the cryptocurrencies craze, OneCoin spread to all parts of the globe, attracting millions of people and collecting billions of dollars from investors believing the promise that they were buying into the Bitcoin killer. However, Dr Ruja's creation was not exactly a form of digital cash and since its inception five years ago it has been plagued by fraud warnings from analysts, the media and regulators. The packages it sold contained a certain number of tokens that allowed participation in the mining of OneCoin, in addition to awarding bonuses in an affiliate program for attracting new buyers - details that prompted FBI and US prosecutors to declare it an "A Multibillion-Dollar Pyramid Scheme Involving The Sale Of A Fraudulent Cryptocurrency".
As of 2019, Ruja Ignatova is indicted in absentia on several counts in US and faces up to 85 years in prison if found guilty (she was last seen in 2017 and her current whereabouts are unknown). Her brother Konstantin was arrested in Los Angeles in March 2019 and was also charged with wire fraud. He initially pleaded not guilty but in October signed a cooperation agreement and admitted to having been part of a criminal enterprise. He testified in another related case against US lawyer (formerly with Locke Lord) Mark Scott who was arrested in 2018 and accused of money laundering and bank fraud to the benefit of OneCoin.
Reviewing the documents and the testimony from these lawsuits allowed for the calculation of OneCoin's incomes. The prosecution quotes internal accounting logs from OneCoin, according to which revenue by the third quarter of 2016 was 3.353 billion euro and profit stood at 2.232 billion euro.
Capital newspaper has also gained access to the same data through its own sources. Even though the authenticity of the documents cannot be confirmed 100%, there are enough indications to consider them genuine. Excel tables from the same period confirm the figures cited by US prosecutors. They paint a picture of phenomenal growth that is unlikely to have slowed post-September 2016, a full year before Ignatova disappeared, especially considering that the company still functions and attracts new members to this day. According to the charts, active OneCoin members numbered 2.1 million, while in later years the company would cite 3.5 million. Another document - the only file from 2017 - shows 1.8 million new members just for that year.
Greater than Giza's
To put things into perspective, if OneCoin had operated through one company and had been registered in Bulgaria, it would have very likely topped the 2016 chart of the biggest Bulgarian companies in terms of revenue. Or, at worst, it would have come second after Lukoil Neftochim Burgas.
Data shows that the company accumulated nearly 2 billion euro of revenue by September. Fortunately or not, OneCoin operated mainly through offshore companies and income was taken in through several different channels and funneled to known and unknown companies, which means that for the moment the only information about consolidated earnings has come from the US prosecution and Capital's own investigation.
OneCoin would not have been just a revenue leader, but also a leading global player among Bulgarian companies. Most sales occurred in China (about 60%), yet there were purchases from nearly every corner of the globe. Data shows that four packages were purchased from Antarctica - a continent without a permanent population that mostly hosts scientific and research expeditions.
The sale dynamics, however, reveal an interesting migration. After the initial boom in China, Asia and Europe, increasing warnings from regulators and the ensuing investigations saw the company´s activities get redirected to markets such as Latin America and Africa.
Bulgaria, home to some of the company´s offices, was far from being an active market and there were virtually no sales here until 2016. In her only interview for Capital dating back to 2015, Mrs Ignatova explained that she doesn't sell in Bulgaria to prevent a conflict of interest. Additionally, most of its Bulgarian OneCoin members seem to have been inherited from another company of dubious repute and often plagued by fraud allegations called OPN (Opportunity Network) that operated under the name SiteTalk. OneCoin purchased it along with its member base at the beginning of 2016. As a consequence, deposits from Bulgaria barely reached two million euro from 3347 members, thus very much limiting the effects of the downfall.
This, however, is not the case everywhere. Data shows that the vast majority of OneCoin members deposited small sums - about 88% of revenue came from the cheapest packages ranging from 110 to 1100 euro. The largest chunk of revenue came from selling the 5500 euro Tycoon package. More than 1100 people, nearly all of them from China, bought the most expensive 118 000 euro Ultimate package. And that's not even the highest amount - after the arrest of Konstantin Ignatov a class action lawsuit was filed against OneCoin in US courts. Documents revealed that one of the leading claimants - the Montana cardiologist Donald Berdeaux - claimed to have deposited a total of 755 000 dollars in OneCoin between August 2015 and May 2016.
The OneCoin founder has not appeared in public for over two years and "Where is Ruja?" has turned from a question of concern to a small community to one of the most listened to podcasts on the BBC (The Missing Cryptoqueen). Yet another question - even more difficult to answer - concerns the whereabouts of at least 3.3 billion euro.
Part of the sum was spent on bonuses for the company's affiliate program. The profit cited by US prosecutors reflects precisely that 1.1 billion euro was transferred as bonuses to active members. This comes with a caveat or two - cash withdrawals were subject to different types of limitations and the data in the files shows that only about 130 million euro were paid out by September 2016. The fate of the remainder, in spite of nominally being assigned to active members, is unclear.
OneCoin had some running expenses since aside from keeping offices in Sofia (OneCoin network employs about 60 people to this day), Dubai, London and Hong Kong, it also organized opulent promotional events around the globe. If the allegations of US prosecutors are correct, another significant portion must have gone to "a network of regular corrupt payments to state officials around the world in order to facilitate OneCoin's fraudulent scheme".
Lawyers' fees incurred costs as well, such as those paid to Mark Scott, who was arrested but had previously earned multimillion retainers that he invested in property, a yacht, luxury cars, jewellery and watches. One portion was reclaimed by different institutions around the globe - in 2018 Chinese media reported the arrest of 98 individuals and the recovery of 268 million dollars after a two-year investigation. The German financial regulator BaFin announced in 2017 that it had blocked 29 million euro, while smaller sums were confiscated in India.
At any rate, regardless of the exact amount, it is clear that there is a huge deficit of at least a few billion. US authorities allege that most of the funds reached co-founders Ruja Ignatova and Sebastian Greenwood in one form or another. Under oath, Konstantin Ignatov claims that before her vanishing act his sister pocketed more than 500 mn euros and a sizeable chunk also went to Greenwood (though no specific figure is stated).
He also claims that over the years there were huge thefts from various persons affiliated with OneCoin that were never reported to the authorities as the money came from a fraud. He testifies that at a certain point in time there was an apartment in Hong Kong filled with cash from OneCoin victims and Greenwood stole over 100 mn dollars, but he returned most of it after threats from Ignatova. A Dubai-based money launderer for OneCoin named Aamer Abdul Aziz also acquired about 100 mn euros.
BaFin claims 360 million euro passed through the OneCoin's German servicing company called IMS from December 2015 to December 2016. Be that as it may, most of the details came from Mark Scott's trial, where he stands accused of laundering around 400 million dollars on behalf of OneCoin.
The great laundromat
At the centre of the OneCoin's money operations was Mr Scott, who registered most of the companies used to funnel the funds attracted by Dr Ruja's scheme. He was introduced to Ruja Ignatova via email on September 30th 2015. In his testimony, Mr Scott claims that they were introduced by Gilbert Armenta, owner of the private family office Fates Group and former owner of Georgia's Capital Bank. The bank provided services for OneCoin until 2016 when its license was revoked by the National Bank of Georgia for breaching money laundering regulations. According to Konstantin Ignatov, Armenta was a money launderer and lover of his sister and the prosecutors' exhibits contain mails from Ruja to both of them and audio recordings from phone calls between Ignatova and Armenta.
In early 2016, Scott registered MSSI LTD and a series of funds under the name Fenero in the British Virgin Islands, the Cayman Islands and Ireland. A total of 364 million euro and 10 million dollars were deposited into their bank accounts between June 2016 and February 2017. The money came from about ten bank accounts belonging to different companies from several countries: International Marketing Services GmBH (the company's assets were frozen by BaFin), International Marketing Services Pte (Singapore), Star Merchant (Hong Kong), Fates Group (the aforementioned family office owned by G. Armenta) and B and N Consult (Bulgaria). The money trail has shown that eight of these accounts were directly or indirectly fed funds from the purchase of educational packages by OneCoin members, while there are indications that Star Merchant was directly controlled by Ms Ignatova.
According to Scott's statements to banks, institutions and his FBI testimony, Fenero is a family office registered as a private equity fund that manages the fortunes of a number of wealthy European families. The prosecution alleges that he presented false information about the money's origin, even though he was fully aware that the sums originated from individuals associated with OneCoin and Ruja Ignatova. During his interrogations, he named Gilbert Armenta and Irina Dilkinska, who was introduced to him by Ms Ignatova. At the time Ms Dilkinska was OneCoin's Chief of Legal Department as well as manager and proprietor of B and N consult.
Nevertheless, when he described her role to Apex Fund Services, the company that registered the Fenero funds, Mr Scott presented Ms Dilkinska as a technology investor and her B and N Consult as a purveyor of licensed technologies to companies like Singapore and Germany-based International Marketing Services. He declared that the money transfers to Fenero were payments for these services.
Problems started arising only when at the end of July 2016 Scott accidentally forwarded email correspondence with Ms Dilkinska to the Apex board, where her internal OneCoin email address was visible. As a result of the questions that followed and the explanation that the many accusations and warnings had prompted a detailed investigation, Mr Scott terminated the contracts with Apex and continued his activities through the Cayman-based DMS bank, from where he transferred over 273 million euro to Bank of Ireland accounts. From there, after a series of obstacles and blocked transfers, a large portion of the money was sent to Phoenix Fund Investments in the UAE - another family office that the prosecutors claim is controlled by one of the OneCoin founders. It is chaired by the aforementioned Aamer Abdul Aziz.
The Cryptoqueen and the president's brother
The most interesting story, however, happened shortly before that. In July 2016, Mr Scott wrote to Apex soliciting a 30-million-euro credit for CryptoReal Investments Trust for the purchase of a Madagascar oil field (lot 3112) from Hong Kong-based Barta Holdings Limited. In the letter, he indicated that a Barta representative is related to two former US presidents which is a good enough reason "not to ask too many questions about this transaction".
There was even a CryptoReal Investments website that is now inactive. It specified Hoifu Energy Group (registered on the Bermuda Island and listed in Hong Kong) as the seller of the lot. The company's managing director and board vice-chairman are Neil Bush, son of the late George H.W. Bush and brother of George W. Bush. According to Hoifu´s reports, it really owns an oil field in Madagascar but the lot's number is 2101, while 3112 belongs to a different company. It is unclear whether such a deal ever existed since the company did not respond to Capital´s questions. US prosecutors claim that subsequently 10 million euro from Barta´s account was wired to Sebastian Greenwood and they suspect money laundering.
As for real estate, Konstantin Ignatov claims that the Bulgarian properties are far from being the only ones. She also bought a mansion in Frankfurt for her husband (a German lawyer named Bjorn Strehl) and another in Dubai. Other sources also point to properties in London. How the money for the purchase of the Sofia properties was obtained is also unclear. The two UAE-registered companies through which they were bought have been closed down and Emil Harsev, a Bulgarian business consultant, is now the owner of OneCoin´s real estate. According to his declaration under the money laundering prevention law, he is the actual owner, while after the deals of early 2017 he stated that he is representing a client. Presently, the OneCoin HQ is full of life and employees. The former Krim restaurant building, which was supposed to be Ruja Ignatova´s personal residence, has been remodelled and is being looked after, even though it remains deserted.