Current Leader Konstantin Ignatov Arrested at Los Angeles
International Airport
Geoffrey S. Berman, the United States Attorney for the
Southern District of New York, Cyrus R. Vance Jr., the District Attorney for
the County of New York, John R. Tafur, the Special Agent in Charge of the
Newark Field Office of the Internal Revenue Service-Criminal Investigation
(“IRS-CI”), William F. Sweeney Jr., and the Assistant Director-in-Charge of the
New York Field Office of the Federal Bureau of Investigation (“FBI”), announced
that KONSTANTIN IGNATOV was arrested March 6, 2019, at the Los Angeles
International Airport, on a wire fraud conspiracy charge stemming from his role
as the leader of an international pyramid scheme that involved the marketing of
a fraudulent cryptocurrency called “OneCoin.”
An Indictment charging IGNATOV’s sister, RUJA IGNATOVA – a founder and
original leader of OneCoin – with wire fraud, securities fraud, and money
laundering offenses was unsealed yesterday.
As a result of misrepresentations that IGNATOV, IGNATOVA, and others
made about OneCoin, victims invested billions of dollars worldwide in the
fraudulent cryptocurrency. Following his
arrest, IGNATOV appeared in Magistrate Court in the Central District of
California, and was detained on the charge contained in the Complaint.
Manhattan U.S. Attorney Geoffrey S. Berman 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.”
New York County District Attorney Cyrus R. Vance, Jr.,
said: “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.
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.”
IRS Special Agent in Charge John R. Tafur said: “This is an old scam with a virtual
twist. As alleged in court documents,
the cryptocurrency OneCoin was established for the sole purpose of defrauding
investors. IGNATOV and IGNATOVA
allegedly convinced victims to invest in OneCoin based on complete lies about
the virtual currency. IRS Criminal
Investigation is committed to investigating cryptocurrency scams in an effort
to protect the American public and bring cryptocurrency crooks to justice.”
FBI Assistant Director-in-Charge William Sweeney, Jr.
said: “As we allege, OneCoin was a
cryptocurrency existing only in the minds of its creators and their
co-conspirators. Unlike authentic
cryptocurrencies, which maintain records of their investors’ transaction
history, OneCoin had no real value. It
offered investors no method of tracing their money, and it could not be used to
purchase anything. In fact, the only
ones who stood to benefit from its existence were its founders and
co-conspirators. Whether you’re dealing
with virtual currency or cold, hard cash, we urge the public to exercise due
diligence with any investment.”
According to the allegations contained in the Complaint
charging KONSTANTIN IGNATOV and the Indictment charging RUJA IGNATOVA, and in
other court papers, and other documents in the public record:[1]
IGNATOV currently serves as the top leader of OneCoin Ltd.,
a company marketing a purported cryptocurrency named “OneCoin,” which the
investigation has revealed is in fact a fraudulent pyramid scheme. OneCoin Ltd. was co-founded in 2014 by
IGNATOVA, and is based in Sofia, Bulgaria.
IGNATOVA served as OneCoin’s top leader until her disappearance from
public view, in October 2017. Starting
in late 2017, IGNATOV, who is IGNATOVA’s younger brother, assumed high-level
positions at OneCoin, rising to the top leadership position by mid-2018.
OneCoin Ltd. operates as a multi-level marketing network
through which members receive commissions for recruiting others to purchase
cryptocurrency packages. This
multi-level marketing structure appears to have influenced rapid growth of the
OneCoin member network. Indeed, OneCoin
Ltd. has claimed to have more than 3 million members worldwide, including
victims living and/or working within the Southern District of New York. OneCoin continues to operate to this day.
As a result of misrepresentations made by IGNATOV, IGNATOVA,
and other OneCoin representatives, victims throughout the world wired
investment funds to OneCoin-controlled bank accounts in order to purchase
OneCoin packages. Records obtained in
the course of the investigation show that, between the fourth quarter of 2014
and the third quarter of 2016 alone, OneCoin Ltd. generated €3.353 billion in
sales revenue and earned “profits” of €2.232 billion.
Among a number of other representations, OneCoin Ltd. has
claimed that the OneCoin cryptocurrency is “mined” using mining servers
maintained and operated by the company, and that the value of OneCoin is based
on market supply and demand. The
purported value of a OneCoin has steadily grown from €0.50 to approximately €29.95
per coin, as of January 2019. In fact,
the value of OneCoin is determined internally and not based on market supply
and demand; and OneCoins are not mined using computer resources. Moreover, the investigation has revealed that
IGNATOVA and her co-founder conceived of and built the OneCoin business fully
intending to use it to defraud investors.
For example, in one email between IGNATOVA and her co-founder, IGNATOVA
described her thoughts on the “exit strategy” for OneCoin. The first option that IGNATOVA listed was,
“Take the money and run and blame someone else for this . . . .”
Additionally, OneCoin Ltd. has claimed to have a private
“blockchain,” or a digital ledger identifying OneCoins and recording historical
transactions. The investigation has
revealed that OneCoin lacks a true blockchain, that is, a public and verifiable
blockchain.[2] Moreover, by approximately March 2015, IGNATOVA and her
co-founder had started allocating to OneCoin members coins that did not even
exist in OneCoin’s purported private blockchain, referring to those coins as
“fake coins.”
As the founder and leader of OneCoin Ltd., IGNATOVA
participated in efforts to market OneCoin to U.S. victim-investors. For example, on July 4, 2015, IGNATOVA
participated in an online webinar, later posted to YouTube.com, in which
IGNATOVA announced the official opening of the United States market for
OneCoin.
Since taking over leadership of OneCoin following IGNATOVA’s
disappearance from publicly running the company, IGNATOV has himself made false
representations to OneCoin members to solicit trader package purchases and
investments into the company. For
example, IGNATOV has repeatedly represented that an “initial public offering”
of OneCoin would occur on various dates in 2018 and 2019, in an effort to
generate excitement and solicit additional investments from member
victims. However, the purported offering
was repeatedly postponed, and no such offering has taken place. Moreover, IGNATOV has been personally
involved in manually setting and increasing the purported Euro value of
OneCoin, contradicting claims that the value is set by supply and demand. Finally, the investigation has revealed that
IGNATOV is aware that OneCoin-derived funds have been routed through a series
of purported “investment fund” accounts used to hide the origin of the money,
i.e., to launder OneCoin fraud proceeds.
Between February 27, 2019, and March 6, 2019, IGNATOV
travelled to the United States to conduct OneCoin-related business, including
in Las Vegas, Nevada, where he stayed at a casino resort. While in Las Vegas, IGNATOV met with a number
of OneCoin affiliates. During the
meeting, one of the first questions posed to IGNATOV was when OneCoin members
would be able to monetize, or “cash out,” their OneCoins. IGNATOV reportedly responded, “if you are
here to cash out, leave this room now, because you don’t understand what this
project is about.”
IGNATOVA, a third defendant, MARK S. SCOTT, and others
agreed to launder the proceeds of the OneCoin fraud scheme. Specifically, IGNATOVA, SCOTT, and others
agreed with others to conduct transactions involving OneCoin fraud proceeds in
order to conceal and disguise the nature, location, source, ownership, and
control of the proceeds. SCOTT, a former
partner of a major United States law firm, assisted IGNATOVA and others in
laundering more than $400 million through a series of purported investment
funds holding bank accounts at financial institutions in the Cayman Islands and
the Republic of Ireland, among other locations.
The indictment charging SCOTT was previously unsealed, and SCOTT was
arrested in Barnstable, Massachusetts, on September 5, 2018. SCOTT’s case is currently pending before U.S.
District Judge Edgardo Ramos.
*
* *
IGNATOVA, 38, of Sofia, Bulgaria, is charged with one count
each of wire fraud, conspiracy to commit wire fraud, securities fraud, and
conspiracy to commit money laundering, each of which carries a maximum sentence
of 20 years sentence, and one count of conspiracy to commit securities fraud,
which carries a maximum sentence of five years in prison. IGNATOVA remains at large.
IGNATOV, 33, of Sofia, Bulgaria, is charged by Complaint
with one count of conspiracy to commit wire fraud, which carries a maximum
sentence of 20 years in prison.
SCOTT, 50, of Coral Gables, Florida, is charged by
Indictment with one count of conspiracy to commit money laundering, which
carries a maximum sentence of 20 years in prison.
The maximum potential sentences in this case are prescribed
by Congress and are provided here for informational purposes only, as any
sentencing of the defendant will be determined by the judge.
Mr. Berman and Mr. Vance praised the outstanding
investigative work of IRS-CI and the FBI, which jointly conducted this
investigation with the Special Agents from the U.S. Attorney’s Office and
analysts from the New York County DA’s Office Major Economic Crimes Bureau.
The prosecution of this case is being handled by the
Office’s Complex Frauds and Cybercrime Unit and Securities and Commodities
Fraud Task Force. Assistant United
States Attorneys Christopher J. DiMase and Nicholas Folly, and Special
Assistant United States Attorney Julieta V. Lozano of the New York County
District Attorney’s Office, are in charge of the prosecution.
The charges contained in the Indictments and Complaint are
merely accusations, and the defendants are presumed innocent unless and until
proven guilty.
If you think you may have been a victim in this case or have
additional information, please contact the United States Attorney’s Office at
866-874-8900, or by email at USANYS.OneCoin@usdoj.gov.
[1] As the
introductory phrase signifies, the entirety of the texts of the Complaint and
Indictment constitute only allegations, and every fact described herein should
be treated as an allegation.
[2] OneCoin Ltd.’s
private blockchain may be contrasted with Bitcoin’s blockchain, which is
decentralized and public.
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