The OneCoin cryptocurrency investment project has responded to the suggestion it is a Ponzi or pyramid scheme, arguing it does not fit the narrow definition of either.
In a report by Samoa Observer on May 14, the Central Bank of Samoa is quoted as saying last month that OneCoin is a “hybrid ponzi-pyramid scheme” which “laundered money through New Zealand to Samoa” and was targeting local residents through churches.
After the Observer reported the warning, it said it received a statement from OneCoin presenting its claims as to why it is neither Ponzi nor pyramid scheme.
It firstly offered up a definition of Ponzi schemes as arrangements where “revenue for old investors is generated through the investment of new investors.” It also said that, regarding legislation on pyramid schemes, “its origin and its express purpose is consumer protection.”
OneCoin makes the defense, therefore, that it, in fact, does not contractually require its agents, or Independent Marketing Associates (IMAs), to recruit other IMAs in order to earn their bonuses.
OneCoin states:
“IMAs’ success depends entirely on their personal commitment, abilities and effort. IMAs can obtain an educational package and can only receive a bonus for their marketing activity, meaning they are not obliged to incur any additional expenses or recruit a new IMA.”
Agents are not rewarded for the recruitment of new agents but for the “value of sales,” it adds.
OneCoin goes on to make the argument that because when IMAs join the scheme they sign a contract classifying them as “an independent, self-employed business owner,” they cannot be defined as consumers who are protected under general legislation.
The statement reads:
“The users which are part of the OneLife Network are NOT consumers. They are IMAs, meaning they are self-employed business owners.”
In effect, OneCoin says it’s not a pyramid scheme because any financial harm to agents can’t be classed under a dictionary definition of pyramid scheme, and it’s not a Ponzi scheme because, although heavily incentivized to do so, it’s not compulsory for IMAs to recruit new agents.
The statement further claims that as a “centralized, closed source cryptocurrency” with “strict” anti-money laundering and know-your-customer rules, OneCoin “is much more compliant than decentralized [cryptocurrencies].”
Indictments and arrests
It should be noted that the U.S. Attorney for the Southern District of New York (SDNY) recently indicted the leaders of the scheme, Ruja Ignatova and Konstantin Ignatov, on charges of wire fraud, securities fraud and money laundering. Konstantin was arrested at the time, while Ruja remains at large.
U.S. Attorney Geoffrey Berman said at the time that “these defendants created a multibillion-dollar ‘cryptocurrency’ company based completely on lies and deceit.”
The scheme has also been the subject of fraud warnings from authorities in numerous nations, while people associated with OneCoin have been arrested and charged in China and India. Its operations were also shut down in Italy.
A lawsuit, filed in New York last week by law firm Silver Miller on behalf of investor Christine Grablis, alleges that OneCoin fraudulently promoted cryptocurrency investments and violated federal securities laws. Grablis claims she lost $130,000 through the scheme.
Pyramids image via Shutterstock
https://www.coindesk.com/onecoin-claims-its-not-a-ponzi-or-pyramid-scheme
