In March, news broke of fraud and money laundering charges brought against the leaders of the global, multi-billion-dollar OneCoin cryptocurrency pyramid scheme. The story has continued to develop in months since, with arrests made and new information revealed about the extent of the damages that have followed in its wake.
To date, the pyramid scheme has allegedly defrauded upwards of three million worldwide participants of more than $3 billion. Numerous founding members are under investigation worldwide, in countries including the U.S. (where one of the suspects has been detained), Germany, Great Britain, Ireland, Ukraine, the Baltic States, Italy, Canada and Singapore.
Some of the most striking lies told to OneCoin members were that the coin value was based on market supply and demand, that the value had grown from $.56 to approximately $33.60 per coin as of January 2019, and that the currency operated on a private blockchain. Law enforcement has since revealed that OneCoins were not mined using computer resources as stated, and the value of the coins was entirely subjective. Further, investigators found that the entire operation was not in fact based on a true and verifiable blockchain.
As cryptocurrencies infiltrate the mainstream, investors and consumers must be vigilant about the serious potential of fraudulent schemes like we’ve seen with OneCoin. Until the many disparate cryptocurrencies begin to consolidate and regulators issue clear guidance, we’ll likely see more attempts to defraud individuals and businesses using tokenized programs.
Services like asset-tracing can help to reduce instances of anti-money laundering and other forms of cryptocurrency fraud, and should be explored as a solution for organizations and governments looking to participate in and/or oversee crypto-based economies. Globally, public and private sectors will need to begin considering whether cryptocurrency companies should be audited, required to report and governed by other controls required in today’s regulated financial services institutions.
This story is one of many recent headlines highlighting how cryptocurrency and blockchain are changing and impacting the global business landscape. Our team of blockchain experts are keeping a close watch on how the cryptocurrency industry is evolving and how emerging investigations and regulatory activity may impact our clients.