Karl Sebastian Greenwood, the co-founder of the infamous cryptocurrency scam OneCoin, has been sentenced to 20 years in prison and fined US$300 million for his role in defrauding investors of a staggering US$4 billion. Greenwood, alongside the still-elusive ‘Cryptoqueen’ Ruja Ignatova, orchestrated one of the largest scams in history, deceiving over 3.5 million victims worldwide.
Announcing Greenwood’s sentence, US Attorney Damian Williams emphasized its significance in deterring fraudulent activities within the financial sector. “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 system through fraud,” Williams stated.
Over a frenzied three-year period commencing in 2014, Greenwood and Ignatova capitalized on the cryptocurrency hype, promoting OneCoin as a ‘Bitcoin killer’ through an extensive multi-level marketing (MLM) campaign. This campaign ultimately amassed billions of dollars from unsuspecting victims worldwide.
Greenwood, the top salesman in the MLM structure, personally pocketed more than US$300 million. However, all these ill-gotten gains have now been forfeited. His high-profile pitch convinced participants that they were investing in a blockchain-based cryptocurrency on par with Bitcoin.
The FBI acknowledged Greenwood’s prowess as a salesman and the role of the MLM structure in OneCoin’s rapid ascent. However, they were clear that the misrepresentations made by Greenwood and others to OneCoin investors were numerous, and the cryptocurrency itself held no actual value.
Despite lacking any genuine value, the price of OneCoin purportedly surged from €0.50 to €29.95, enriching Greenwood and Ignatova while perpetuating the false notion that OneCoin was benefiting from Bitcoin’s success.
In reality, emails exchanged between the co-conspirators revealed that OneCoin was “not mining actually – but telling people s**t”.
The FBI further highlighted how OneCoin deceived its members by falsely claiming that the cryptocurrency’s value was determined by market supply and demand, when in truth, OneCoin arbitrarily set its value without regard for market forces.
Contrary to claims that OneCoin was mined in Sofia, Bulgaria, most tokens sold by Greenwood and Ignatova were never added to any public, verifiable blockchain, and were internally labeled as ‘fake coins’.
By June 2015, OneCoin’s accounting structure included categories such as ‘mined coins,’ ‘mined coins (real)’, and ‘fake coins’. This complex web of deceit unraveled when Ruja Ignatova alerted Greenwood to the unexpected sales of 1.3 billion fake coins, leading her to exclaim, “We are f*cked”.
Following these revelations, Greenwood indulged in a lavish lifestyle, squandering investors’ funds on luxury hotels, beach villas, designer goods, a Sunseeker yacht, and real estate across multiple countries.
While Ruja Ignatova fled Sofia for Athens in 2017 and remains wanted by the FBI, Greenwood was arrested and extradited from Thailand in July 2018 to face charges of fraud and money laundering.
Greenwood’s conviction marks a significant milestone in the OneCoin scandal, though it is not the only multi-billion-dollar disaster to result from scammers capitalizing on Bitcoin’s meteoric rise over the past decade.
In November, crypto exchange giant FTX collapsed in a US$47 billion debacle, while in 2021, a Turkish crypto exchange founder disappeared with US$2.6 billion worth of investors’ assets. Last year, a married couple was arrested for attempting to launder US$7.4 billion worth of Bitcoin stolen in the 2016 Bitfinex exchange breach.
In Australia, where the ASIC has warned against dealing with OneCoin, operators like Swyftx and Binance Australia have faced challenges amid tightening regulations. Australian banks have cracked down on exchange-related transfers due to the ongoing cryptocurrency market instability, prompting calls for a risk register to document exchanges’ compliance measures.
BBC reports that Greenwood, a citizen of the UK and Sweden, was arrested in Thailand in July 2018, pleaded guilty to wire fraud and money laundering in December. OneCoin, founded in 2014 in Bulgaria, operated as a global pyramid scheme.
Additionally, former spy Frank Schneider, an FBI-wanted individual and trusted advisor to Ruja Ignatova, has disappeared from France. Facing a potential 40-year prison sentence on fraud and money laundering charges related to the US$4 billion cryptocurrency scam, Schneider eluded electronic surveillance while under house arrest in France.
Ruja Ignatova, known as the Cryptoqueen, has remained elusive since 2016. Experts suggest that the FBI can employ Artificial Intelligence (AI) to track her by analyzing available facial images. AI has the capability to identify individuals by their facial structure, even if they have undergone plastic surgery, potentially aiding in the search for Ignatova.
