OneCoin leader Konstantin Ignatov pleads not guilty to conspiracy to commit wire fraud

Maria Nikolova

The proceedings against individuals associated with the fraudulent cryptocurrency scheme continue at the New York Southern District Court.

There has not been much information about the proceedings against the individuals associated with notorious cryptocurrency scheme OneCoin. FinanceFeeds research has shown that, after the New York Southern District Court granted a continuance of the time within which the Government to file indictment or information, proceedings involving Konstantin Ignatov, the leader of OneCoin, were held before Magistrate Judge James L. Cott.

During the proceedings, Konstantin Ignatov entered a plea of “not guilty” to Count 1 – conspiracy to commit wire fraud.

According to the allegations contained in the Complaint, starting in late 2017, Ignatov, assumed high-level positions at OneCoin, rising to the top leadership position by mid-2018.

OneCoin Ltd. operates as a multi-level marketing network through which members receive commissions for recruiting others to purchase cryptocurrency packages. This multi-level marketing structure appears to have influenced rapid growth of the OneCoin member network. Indeed, OneCoin Ltd. has claimed to have more than 3 million members worldwide, including victims living and/or working within the Southern District of New York.

Among a number of other representations, OneCoin Ltd. has claimed that the OneCoin cryptocurrency is “mined” using mining servers maintained and operated by the company, and that the value of OneCoin is based on market supply and demand. In fact, the value of OneCoin is determined internally and not based on market supply and demand; and OneCoins are not mined using computer resources.

Additionally, OneCoin Ltd. has claimed to have a private “blockchain,” or a digital ledger identifying OneCoins and recording historical transactions. The investigation has revealed that OneCoin lacks a true blockchain, that is, a public and verifiable blockchain.

Furthermore, Ignatov has repeatedly represented that an “initial public offering” of OneCoin would occur on various dates in 2018 and 2019, in an effort to generate excitement and solicit additional investments from member victims. However, the purported offering was repeatedly postponed, and no such offering has taken place.

The criminal proceedings also target Ruja Ignatova – the sister of Konstantin Ignatov, as well as Mark S. Scott, a U.S. citizen and attorney, employed for a portion of the relevant time period as a partner at an international law firm, who is said to have organized, owned, operated a series of investment funds known as the “Fenero Funds,” which he used for the purpose of laundering OneCoin fraud proceeds. According to the US Government, Scott engaged in a scheme to launder approximately $400 million of OneCoin proceeds through the Fenero Funds and related entities between approximately 2016 and 2018. Ultimately, Scott transferred millions of dollars of OneCoin proceeds into the United States for his own personal use, including to purchase multi-million dollar homes, a yacht, and luxury cars.

Earlier this week, the US Government sought to defend the execution of search warrants on Scott’s properties back in 2018. The US authorities argued that the search warrants executed on the defendant’s properties were: (i) supported by ample probable cause, in the form of detailed affidavits submitted by case agents personally involved in the investigation; (ii) sufficiently particularized; and (iii) not overbroad. Moreover, the agents executed the search warrants in a reasonable manner, with knowledge of and regard for the warrants, and the Government seized and has retained the resulting evidence, including electronic devices, in a lawful and appropriate manner.

Finally, the Government notes that it seized potentially privileged information consistent with previously established procedures designed to protect attorney-client and any other applicable privileges, including the use of a taint team to search, seize, and review materials subject to the search warrants.

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