Ponzi schemes are not a new concept to the world, but they’ve become supercharged with the explosion of digital currencies in recent years. There have been dozens of prominent scams, responsible for billions stolen from investors; but perhaps no Ponzi scheme has been as devastating as OneCoin, which continues to produce incredible new revelations after years of investigation.
But first, what is a Ponzi scheme? While the practice pre-dates him by quite a bit, the man who popularized this type of scam was Charles Ponzi, a man who promised investors large returns on their investment in postage coupon arbitrage. He would use money from newcomers to pay out older investors. In a year, investors had lost $20 million, or $254 million when adjusted for inflation.
That same model, of selling promises to easy marks looking to make a quick buck, has been replicated several times in the crypto world. A famous example has been BitConnect, which offered its own currency and lending platform, promising investors guaranteed returns, and bonuses if they brought in other investors. When state regulators began looking into their business model, they quickly closed up shop, leaving investors furious. They continue to face FBI investigation for their scam, with leaders of the company getting arrested for their efforts. In total, investigators estimate as much as $3.5 billion in investments were lost.
But the biggest known crypto Ponzi scheme of all has been OneCoin. Started by Dr. Ruja Ignatova in 2014, OneCoin was promoted as an anonymous, decentralized and borderless digital currency that would take over the world. Sounds a lot like some other digital currencies, but the company’s practices go a long way toward proving it was a Ponzi scheme.