Apart from bitcoin, there are over 1,200 other cryptocurrencies in the virtual currencies ecosystem. While some of these altcoins have a lot to offer to their users, many have been accused of being pyramid schemes or pump-and-dump projects.
Uncovering an Altcoin’s Fraudulent Behavior
According to a Bulgarian news source, the country’s special prosecutors have joined the international operation to neutralize one such pyramid scheme involving commercial fraud, MLM and money laundering through the creation and distribution of Sofia-based crypto company OneCoin.
In 2016, the UK’s Financial Conduct Authority (FCA) warned the public to be wary of OneCoin:
“We believe consumers should be wary of dealing with OneCoin, which claims to offer the chance to make money through the trading and ‘mining’ of virtual currencies. If you believe that you have been a victim of fraud in this regard, or have had dealings with OneCoin, then please contact Action Fraud or telephone them on 0300 123 2040.”
Fast forward to 2018 and the investigation is still ongoing, gathering significant momentum. The Prosecutor’s office stated that investigators from the Special Prosecutor’s Investigation Unit and Officers from Bulgaria’s Directorate Against Organized Crime and the State Agency for National Security have all joined the international investigation, after an international legal assistance order was sent from the Prosecutors office in Bielefeld, Germany.
In 2017, the Bulgarian office of OneCoin was searched by investigators, and a statement from the Prosecutor’s office indicates that a lot of material evidence has been seized, including servers and 50 witnesses have been questioned. “OneCoin Ltd.” is registered in the United Arab Emirates but operates through hundreds of affiliated companies across four continents.
The Bulgarian legal body also stated that it is feared that OneCoin’s scheme could be used to fund organized crime groups and terrorists.
The statement further declared that:
“At present, companies associated with OneCoin Ltd., are being investigated in England, Ireland, Italy, the United States, Canada, Ukraine, Lithuania, Latvia, Estonia and many other countries.”
The firm last posted a press release in August 2017 when it responded to a statement by the Italian Antitrust Commission.
OneCoin is not the only Ponzi claiming to be a real cryptocurrency. On January 8, 2018, BTCManager reported that Texas authorities had issued a cease and desist order to Bitconnect.
There have also been numerous cases of other scams, camouflaging as cryptocurrencies. Some have been shut down by the SEC, while many are yet to be uncovered. In December 2017, the SEC halted the Plexcoin, for instance, due to its illegal practices and the criminal backgrounds of its founders.