The Bulgarian Cryptoqueen and her billion-dollar scam
The Bulgarian crypto Ponzi scheme OneCoin was founded sometime in early 2014. The recorded founders were Ruja Ignatova from Bulgaria and Sebastian Greenwood from Sweden (read more on Sebastian Greenwood here). In April 2014, the duo founded OneCoin Ltd. In the almost six years of its existence, the OneCoin scheme and its messianic Cryptoqueen “Dr. Ruja” have stolen many billions from naive retail investors around the world. Nobody really knows how many billion were stolen. Some experts place OneCoin in the hands of Bernie Madoff (see Wikipedia entry), who allegedly swindled almost $65 billion of investors and produced a total loss of $19.5 billion.
Both founders, Ignatova and Greenwood, retired from OneCoin in 2017. Sebastian Greenwood was arrested in Thailand at the end of 2018 and extradited to the United States. Dr. Ruja, who is indicted with her brother Konstantin Ignatov in the United States, vanished in October 2017 and is still at large. The indictment against Sebastian Greenwood was unsealed on April 6, 2020 and charges him with investment fraud (wire fraud), securities fraud, and money-laundering in the total amount of $1 billion.
The estimated numbers
The U.S. authorities’ investigations into the OneCoin crypto-Ponzi scheme and the indictment of Ruja Ignatova, her brother Konstantin Ignatov and their U.S. attorney Mark S. Scott have uncovered some of the scheme’s financial numbers from the 4th quarter of 2014 to the 3rd quarter of 2016. For these first two years, the U.S. authorities have reported sales of €3,353 billion and a profit of €2,232 billion. This was before the notorious crypto hype in 2017 took off.
In a very rough estimate of the OneCoin scheme’s total amount of raised money from its inception in April 2014 to the end of 2019, we estimate it to be in the range from at least $10 billion to more than $13.4 billion.
FinTelegram estimation is based on the following parameters and assumptions:
- Documented and/or communicated Numbers:
- OneCoin sales in Q3/16 were €3.353 billion (Source: US investigators);
- increased to €4 billion until Q1/17 (Source: leaked OneCoin documents);
- Fortune author David Z. Morris suggests that total revenue could be $19.4 billion
- Business for Home reports $8 billion in sales as of Jan 2018.
- Weekly sales around €60 million in June 2015
- Growth Assumptions
- OneCoin sales in the period Q4/16 to Q4/19 compared to the period Q4/14 to Q3/16 will have
- at least doubled (lower end) but more likely
- tripled (higher end)
- Growth Drivers
- crypto hype in 2017;
- the promised OneCoin IPO for 2018, and
- new members from Africa and South America.
Leaked OneCoin documents presented in Jamie Bartlett‘s BBC podcast The Missing Cryptoqueen support the hypothesis that the OneCoin growth in 2017 was driven by Africa and South America.
The first sale of a OneCoin package allegedly happened in Aug 2014 and in the 65 months since then the scheme reportedly acquired more than 3.6 million members.
The educated guess:
- By mid-March 2017 the OneCoin scheme had raised €4 billion (Source: leaked OneCoin documents);
- This is an average of €32 million sales per week;
- Let’s assume that the average was significantly lower in 2014 and significantly higher in 2016. Hence, we took an average of €40 million per week for 2015 and 2016;
- For the hype year 2017, we doubled this figure to an average of €80 million per week which may even be far too low given the big hype around crypto back then.
- For the years 2018 and 2019, we set a weekly average of €20 million.
- As a result, we estimate that there will be over €10 billion in member payments, i.e. revenue.
Again, this is only a very rough estimate and is based on the findings of the US authorities and the leaked OneCoin documents. What is certain, however, is that the loss of OneCoin members is a multiple of the loss calculated by the U.S. authorities until Q3/16.
In his BBC podcast series The Missing Cryptoqueen, Jamie Bartlett refers to sources claiming the worldwide OneCoin income was as much as $15.8 billion as of early 2018. Bartlett holds it even plausible that the OneCoin scam has stolen more than the $19.4 billion lost by Bernie Madoff’s victims, making it the largest financial scam ever.
Victims across all continents
According to the U.S. authorities, until Q3/16 the OneCoin sources of its proceeds from members can be split across the continents as follows:
- 60% of the $3,353 billion by Q3/16 came from Asian OneCoin members,
- 18% from European OneCoin members,
- 15% from Australian OneCoin members,
- 3% from OneCoin members in North America and the Caribbean, and
- 4% of OneCoin members from around the world.
We now know that in recent years Africa and South America have also been massively attacked by the OneCoin scheme. In this respect, there is some evidence that the upper end of the estimate of the total loss between Q$/14 and YE19, at more than $13 billion, is more likely to be correct.
The Fenero Hedge Funds
Dr. Ruja and her team used different constructions to launder the stolen money. One of these constructions was architected by the US lawyer Mark S. Scott – the so-called Fenero Hede Funds. According to the U.S. prosecutors, some $400 millionen have been laundered via Scott and these funds. Scott has been found guilty by a US jury of bank fraud and money-laundering.
The construction of the Fenero Hedge Funds was used to collect, launder, relabel, and invest the funds received from OneCoin members via various “feeder companies”. The incoming funds were disguised as investments from wealthy European families.
The Fenero Hedge Funds investments enriched and/or benefited only the OneCoin crypto scam’s founders, the management team, and the partners around Ruja Ignatova, Sebastian Greenwood, and their accomplices. The Fenero Hedge Funds and its companies are at the heart of the global money laundering of the OneCoin Scam.
- MSS International Consultants LLC, United States, established by US lawyer Mark S. Scott in 2011. It was the sole shareholder
- MSS International Consultants (BVI) Ltd, British Virgin Islands, est. in Feb 2016 to establish, own and operate
- Fenero Equity Investments L.P., BVI, est. March 2016;
- Fenero Equity Investments II L.P., BVI, est. May 5, 2016;
- Fenero Financial Switzerland L.P., BVI, June 2016;
- Fenero Equity Investments (Cayman) I L.P., Cayman Islands, est. April 2016;
- Fenero Equity Investments (Ireland) Limited, Ireland, est. April 2016;
- Fenero Tradenext Holding Limited, Ireland, est. April 2016;
- Fenero Pct Holdings Limited, Ireland, est. April 2016;
- Fenero Trading Malta Limited, Malta, est. Feb 2017;
There are more Fenero entities than listed above. At the Irish address, South Bank House, Barrow Streed in Dublin Fenero Securities Trading Limited or Fenero Tempsec Limited are also registered. Additional Fenero companies can be found in other jurisdictions.
According to the U.S. investigations, the following entities were associated with the Fenero Hedge Funds in the global money-laundering scheme
- Phoenix Fund Investments, UAE, Aamer Abdul Aziz (aka Amer Abdulaiziz)
- Mumbelli Group LLC, US, Nicole J. Huesmann, David R. Pike
- RavenR Capital Limited, UK, Ruja Ignatova
Feeding monies to the Fenero Hedge Funds
According to the findings of U.S. authorities, between June 2016 and February 2017, the Fenero Hedge Fund accounts collectively received wire transfers totaling approximately €364 million and $10 million. These wire transfers originated from approximately 10 different bank accounts held in the names of various entities, including
- International Marketing Services Pte Ltd (IMS -1)Singapore,
- IMS International Marketing Services GmBH (IMS-2), Germany, Manon Hübenthal, see balance sheet as of Dec 31, 2016.
- International Marketing Strategies Limited, UK, Frank Rickets, Manon Hübenthal (previously Manon Wissmann, read this article in Daily News on money-laundering charges)
- B and N Consult EOOD, Bulgaria, Irina Dilkinska, owned by LeonGroup7, Bulgaria,
- Fates Group LLC, United States, Gilbert Armenta,
- Star Merchant Inc. Limited, Hong Kong, Ruja Ignatova
Most of the feeder companies to the Fenero Hedge Funds are under the direct influence of the OneCoin founders or management. We have the names of Ruja Ignatova, Gilbert Armenta or Irina Dilkinska in the documents. According to the findings of the US authorities, these feeder companies collected the funds of OneCoin members and then sent them to Fenero Hedge Funds.
Money-Laundering via the Bank of Ireland
After receiving the above-described deposits sourced from OneCoin Ltd., between approximately August 2016 and February 2017, the Fenero Hedge Fund accounts transferred approximately €273 million to three accounts held at Bank of Ireland in the Republic of Ireland. Each of the bank accounts was held by “Fenero Equity Investments Ireland.” Bank records for these accounts show that Mark S. Scott controlled each of these accounts.
The U.S. authorities traced approximately €185 million in funds derived from the OneCoin scheme laundered through Fenero Hedge Funds and the Bank of Ireland to Aamer Abdulaiziz’s Phoenix Fund Investments in the United Arab Emirates (UAE). Between Feb 2017 and April 2017 the Fenero Hedge Funds sent more than 10 wire transfers totaling E185 million to the Phoenix Funds Investment bank accounts with a bank in the UAE.
Mark S. Scott and the OneCoin millions
The U.S. authorities uncovered that between approximately February and April 2016, Mark S. Scott received into a United States bank account held in his name, three wires totaling approximately $1 million from the IMS companies. I have further learned that at least $15.5 million of the original €364 million and $10 million sent to the Fenero Hedge Fund accounts was remitted either directly, or indirectly through intermediary accounts, to bank accounts in the United States held in the name of Scott or his MSS International Consultants LLC. Many of these transfers involved accounts held in the name of the US attorney Nicole J. Huesmann who allegedly has assisted Scott in repatriating OneCoin fraud proceeds for Scott’s personal use.
Scott’ used the monies he received from the Fenero Hedge Fund accounts for personal expenses and to fund large luxury purchases, the U.S. authorities found.
German money laundering for Dubai
IMS International Marketing Services
In February 2017, the German regulator BaFin froze the accounts of the German IMS International Marketing Services GmbH (“IMS“). Money from OneCoin victims is said to have been deposited via this IMS and transferred to OneCoin companies in Dubai.
Between December 2015 and December 2016 alone, €360 million is reported to have been transferred via IMS and its accounts with Commerzbank. Of this amount, €29 million was secured by the freezing ordered by BaFin.
The German WB21 Group
- Via WB21 GmbH, Berlin, and its account with Postbank or
- the WB21 PTE. LTD, Singapore, and its account with Perlo Paslaugos, Vilnius Lithuania.
demonstrably laundered OneCoin funds. The WB21 Group had accounts in the USA, Germany, Latvia, Lithuania, Mauritius, and other offshore destinations. It has therefore experienced interesting fraud and money laundering activity in the USA.
WB21 Group and the SEC Complaint
In October 2018, the US Securities and Exchange Commission (SEC) filed a lawsuit against the UK stockbroker Roger Knox as well as against WB21 Group and its founder, the German citizen Michael Gastauer, for securities fraud with a damages amount of $165 million. The WB21 Group also had two Delaware registered companies, WB21 US Inc. and WB21 NA Inc. According to the SEC complaint, Gasteiner and its WB21 Group played a significant role in this fraud case between 2015 and 2018.
Similar to Mark S. Scott with his Fenero Hedge Funds, Michael Gastauer provided false information to the banks about the origin of the stolen money. According to the SEC complaint, the banks were told that the money would come from the investment activities of the WB21 Group.