Three individuals who allegedly ran a crypto pyramid scheme which scammed people to the tune of nearly $4 billion have been indicted in the US.
Konstantin Ignatov, his older sister Ruja Ignatova and a lawyer named Mark Scott have all been indicted as part of the alleged scam.
It centres on a cryptocurrency called OneCoin, which is now believed to be fake.
OneCoin is, in essence, a multi-level marketing system whereby each member receives commission when they successfully sell the OneCoin offer to someone else.
Industry sources suggest that between the fourth quarter of 2014 and the third quarter of 2016, the firm managed to create around $3.8billion US dollars in revenue – much of which was profit.
The charges each individual faces and the circumstances of their indictments are slightly different. According to industry press, Konstantin Ignatov was arrested at Los Angeles International Airport on Wednesday 6th March.
He is charged with wire fraud, meaning that he could receive a maximum sentence of 20 years in jail if found guilty.
Ruja Ignatova had an indictment against her unsealed as part of the process. This was approved by the US Attorney for the Southern District of New York, Geoffrey Berman.
Her charges include several types of fraud, including securities fraud and wire fraud, plus three conspiracy charges – one of conspiracy to commit money laundering, one of conspiracy to commit wire fraud, and one of conspiracy to commit securities fraud.
She has not been arrested and is currently believed to be on the run. She is believed to have led the company on an operational basis until October of 2017, at which point her brother stepped in to lead.
Mark Scott faces a single count of conspiracy to commit money laundering.
In a statement, the New York County District Attorney Cyrus R. Vance, Jr. described the alleged crimes as “compromising the integrity” of the way finance operates.
“As alleged in the indictment, these defendants executed an old-school pyramid scheme on a new-school platform, compromising the integrity of New York’s financial system and defrauding investors out of billions”, he said.
“Our Office urges all crypto investors to scrutinize investment opportunities, recognize the prevalence of fraud in this underregulated space, and proceed with caution.
“I commend U.S. Attorney Berman and my Office’s Major Economic Crimes Bureau for their globe-spanning investigative work and shared commitment to protecting our markets from sophisticated white-collar fraudsters”, he added.
Manhattan US Attorney Geoffrey S. Berman, who was responsible for approving the indictment against Ignatova in court, said: “As alleged, these defendants created a multibillion-dollar ‘cryptocurrency’ company based completely on lies and deceit.
“They promised big returns and minimal risk, but, as alleged, this business was a pyramid scheme based on smoke and mirrors more than zeroes and ones.
“Investors were victimized while the defendants got rich. Our Office has a history of successfully targeting, arresting, and convicting financial fraudsters, and this case is no different”, he said.