Great frauds in history: crypto-queen Ruja Ignatova and her “bitcoin killer”

Ruja Ignatova was born in Sofia, Bulgaria in 1980, before moving to Germany with her family when she was ten. In 2005 she was awarded a doctorate in law from the University of Konstanz. She went on to work for management consultancy McKinsey & Co in their eastern European office. In 2014 Ignatova set up OneCoin, which she claimed was a cryptocurrency that would become a “bitcoin killer”, and began promoting the currency at large public conferences around the world, including one at Wembley Stadium.

What was the scam?

Ignatova invited investors to buy “packages” that would give the owner tokens that could be used to “mine” OneCoin. The price of OneCoin was displayed on a website. Although this website showed the currency soaring in value from £0.43 in January 2015 to over £25 in 2019, this wasn’t based on any real transactions, but solely determined by the people running OneCoin. Ownership of the currency was stored on an ordinary database, rather than the blockchain (digital ledger) underpinning other digital currencies. Those who wanted to withdraw their money were paid out of money flowing in – in other words, it was in effect a Ponzi scheme.

What happened next?

Almost immediately after it began, OneCoin generated controversy with regulators around the world, who warned it could be a scam. Despite this, Ignatova’s charisma continued to lure in large amounts of money. Some likened the organisation to a cult. It was not until she mysteriously disappeared in 2017, just before she was due to give a talk, that the scheme started to unravel. Ignatova is still wanted by the US Department of Justice. Her brother Konstantin was convicted of fraud and money laundering last year, along with a number of other people connected to the scheme.

Lessons for investors

Overall, the US authorities estimate that, between 2014 and 2017, OneCoin took in at least $4bn of investors’ money; some believe the final amount could be as much as $12bn.Investors are unlikely to get much of it back. One big red flag was the use of multi-level marketing techniques, where investors were encouraged to recruit friends and family into the scheme by giving them a small commission based on the additional money that was invested. Many of these commission payments were reinvested in OneCoin.