The so-called CryptoQueen’s primary accomplice has been sentenced to 20 years in prison in the US for his part in a digital currency scam that robbed victims of $4 billion.
OneCoin co-founder Karl Greenwood, 46, a dual national of Sweden and the UK, was sentenced at a federal court in New York on September 12th after pleading guilty in December last year.
His co-conspirator, Ruja Ignatova, 43, of Bulgaria, aka the “CryptoQueen”, remains at large and on the FBI’s Top Ten Most Wanted List.
OneCoin began its nefarious operations in 2014 in Sofia, Bulgaria. Posing as a vehicle for cryptocurrency investors, it was in fact a lure for one of the biggest scams of its kind.
New York attorney Damian Williams said: “As a founder and leader of OneCoin, Karl Greenwood operated one of the largest fraud schemes ever perpetrated. Greenwood and his co-conspirators, including fugitive Ruja Ignatova, conned unsuspecting victims out of billions of dollars with promises of a ‘financial revolution’ and claims that OneCoin would be the ‘Bitcoin killer.’”
In fact, OneCoins were “entirely worthless,” and investors were “left with nothing,” while Greenwood walked away with over $300 million in fraudulent gains – all which he has been ordered by the court to pay back.
“We hope this lengthy sentence resonates in the financial sector and deters anyone who may be tempted to lie to investors and exploit the cryptocurrency ecosystem through fraud,” added Williams.”
How the big scam ballooned
Between 2014 and 2016, the OneCoin scam netted $4 billion from some 3.5 million unsuspecting would-be investors, using what the US Department of Justice (DoJ) described as a “multi-level-marketing (MLM) network” to convince victims they were on to a winner.
During this period OneCoin also extended its criminal operations to the US, which was to mark the beginning of the end for the fraudsters.
Described by the DoJ as a master salesman and marketer, Greenwood eventually fell foul of his own cleverness, drawing the attention of the Internal Revenue Service and FBI. Police in Thailand, where Greenwood was holed up, agreed to his extradition in 2018, one year after US authorities issued a warrant for his arrest.
Greenwood left a lavish trail of extravagance behind him. Through the MLM structure, OneCoin members received commissions for recruiting others to purchase cryptocurrency packages, reminiscent of the classic pyramid scheme. As the top MLM distributor of OneCoin, Greenwood earned 5% of monthly OneCoin sales from anywhere in the world.
This allowed him to make luxurious purchases, including designer clothes and watches, a downpayment on a Sunseeker yacht, and real estate in Spain, Dubai, and Thailand. Not only that, but he used his stolen money to travel the world on a private “OneCoin” airplane and posted promotional videos of his jaunts online. Discreet he was not.
"The misrepresentations made by [Karl] Greenwood and others to OneCoin investors were legion, and the cryptocurrency was worthless."The Department of Justice's damning verdict
Piggybacking off Bitcoin
From its inception, OneCoin sought to piggyback off the success of its legitimate counterpart Bitcoin by presenting itself as a genuine and viable alternative. But it was nothing more than a sham.
“The misrepresentations made by Greenwood and others to OneCoin investors were legion, and the cryptocurrency was worthless,” said the DoJ. “Among other things, OneCoin lied to its members about how its cryptocurrency was valued, claiming that the price was based on market supply and demand.”
In truth the OneCoin fraudsters arbitrarily set its value without regard to market forces. This ostensibly saw it grow from 50 cents per coin to nearly $30 at the start of 2019. A potential red flag to investors would have been that the purported price of OneCoins never decreased.
Greenwood also lied about the utility of the tokens included in trader packages, claiming that they could be used to secure positions in OneCoin’s “mining pools,” depicted in promotional material as computer hardware used to “mine” OneCoins.
“But there were no mining pools and no computers to mine OneCoin either,” said the DoJ. “Greenwood knew that this lie was essential to convincing investors that OneCoin was a legitimate cryptocurrency.”
"Not [cryptocurrency] mining actually - but telling people s**t."OneCoin fraudster Karl Greenwood shows true colors in email to accomplice Ruja Ignatova
The DoJ cited an email sent by Greenwood to Ignatova, in which he said: “[t]he concept of converting tokens into OneCoin is an important phase for validity and truth behind the OneCoin. The so-called ‘mining’ of coins is a concept that is very familiar in the industry and a story we can sell to the members.”
But that’s all it was – a story. Or as Greenwood is said to have put it, “not mining actually – but telling people shit.” In the same exchange, he asked Ignatova, “how can this be investigated and found out?” and “can any member (trying to be clever) find out that we actually are not investing in machines to mine but it is merely a piece of software doing this for us?”
Greenwood and his criminal associates also falsely claimed to have a private blockchain or digital ledger to identify OneCoins and record historical transactions, a core piece of internet-based technology that underpins cryptocurrencies.
“But, in reality, OneCoin lacked a true blockchain – that is, a public and verifiable blockchain,” said the DoJ, adding that by 2015 the pair were allocating a separate category of “fake coins” to accomplices and ultimately victims that did not even exist on their phony blockchain.
“Greenwood and Ignatova began emailing one another models tabulating current and projected future trader package sales volumes along with outstanding tokens and OneCoins,” said the DoJ. “The spreadsheets identified separate lines for ‘mined coins,’ ‘mined coins (real),’ and ‘fake coins.’ The references to ‘fake coins’ referred to OneCoins that had been distributed to members but did not exist on the OneCoin ‘blockchain.’”
The DoJ urges anyone with information about Ignatova’s whereabouts to contact the FBI via its anonymous tipoff electronic form. She is believed by the Bureau to be traveling with armed bodyguards and to have last been sighted in Greece in 2017.
The FBI adds that Ignatova may have had plastic surgery to conceal her identity and could be traveling on a German passport.
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