The Missing Cryptoqueen
By Jamie Bartlett

The crime:

In 2014 OneCoin became just another one of the many newly minted cryptocurrencies looking to cash in on the success of Bitcoin and the much ballyhooed blockchain revolution. What made OneCoin, the brainchild of Bulgarian-born Ruja Ignatova, different was its promotion through a multi-level marketing (MLM) scheme and the fact that there may never have been any actual, or virtual, OneCoins in the first place.

After years of muttering from sceptics over whether OneCoin was a Ponzi or pyramid scheme (in fact it was both, a combination that “rendered facts and logic irrelevant”), the system eventually broke down, a victim of its own success. Billions of “real-world” dollars disappeared, along with tens of billions of “fictitious losses” (an accounting based on what OneCoin was supposed to be worth). Most of the higher-ups in the organization would end up convicted of various financial crimes, but Ignatova herself disappeared in October 2017 and remains missing. Some reports say that she is dead, killed by Russian or Bulgarian mobsters, while others have it that she’s swanning about the Mediterranean on a yacht (which is the conjectural conclusion that’s reached here). As of this writing, she is the only woman on the FBI’s Ten Most Wanted list.

The book:

I made a post a couple of years ago expressing my scepticism of all things crypto. My feeling at the time was that it was mainly a tool being used by bad actors or the very rich to hide their financial dealings. But I also said I didn’t understand the first thing about blockchains and mining. And, since one of my maxims is to not invest in things I don’t know anything about, I’ve always stayed away from crypto. Which I think is pretty good advice for anyone.

The people who put their faith (and life savings) into crypto thought differently. In the digital economy it’s never been a problem if “what exactly investors were buying was vague and unclear.” But never mind the investors. It’s doubtful if Ignatova understood what she was doing either. Her OneCoing co-founder certainly didn’t. Nor did anyone in their MLM network. As Jamie Bartlett puts it when telling the story of one befuddled OneCoin promoter, his “job wasn’t to understand OneCoin, it was to sell it.” Or take this account of OneCoin’s launch:

The genesis block was now launched and the first set of new coins was being “mined.” People in the room must have wondered what that phrase actually meant. Oh, they all repeated the words – genesis block, mining, algorithms – but few had any idea about the technology behind it all. What exactly was happening? Bitcoin’s mining was transparent and distributed – anyone could join, and thousands did. But OneCoin’s mining process was mysterious and secretive. Some in the crowd had heard rumors that two “supercomputers” at hidden locations were cracking puzzles and getting the newly generated coins, which would then be sent to investor accounts, depending on how many packages they’d bought. Most people didn’t care about the finer details though. They’d just heard it was the next Bitcoin.

“Good scams aren’t about facts or logic.” What could possibly go wrong?

Meanwhile, the psychology behind OneCoin’s success is worth unpacking, which is something Bartlett does a good job with:

Greed or desperation alone doesn’t explain why OneCoin hit momentum so fast because those emotions are present in every MLM company, including the ones that fail. Something more powerful was at play: the fear of missing out . . . FOMO. Most OneCoin investors who put money in around this time said the same thing: They didn’t understand the technology but they’d heard of Bitcoin and regretted having not invested. When Bitcoin went stratospheric in 2013, stories proliferated of ordinary people making life-changing money not because of any particular skill or specialized knowledge, but because they got in early. The majority of these early investors weren’t destitute, but they were often just getting by. OneCoin felt like, for once in their life, they’d finally got a break.

Not so different then from buying lottery tickets, only shadier. “FOMO is driven by a desire to get rich quick, a willingness to replace work or effort with a risky bet.” As Glenn Frey sang in “Smuggler’s Blues”: “It’s the lure of easy money, it’s got a very strong appeal.” You don’t need “any particular skill or specialized knowledge.” It’s all a matter of timing. And this is a point that I think is worth underlining. Timing is everything precisely because you know the next big thing isn’t going to last. At some fundamental level you don’t believe in what you’re investing in. You know it’s a scam. You just think it’s a scam that you’ll be able to walk away from, leaving the proverbial “greater fool” holding the bag.

Of course none of it could stand very much looking into, but then who could look into it? Even if you were one of the dozen or so people in the world capable of figuring out their blockchain, OneCoin was a black box. An empty black box, at that. In any event, for investors, “It was nicer to dream than to think.”

“Money has a funny way of fencing off difficult questions and incentivizing strategic and defensible ignorance.” Because what would you rather believe? You can see how magical thinking feeds into stories like this. Just keep the faith and you too can be a crypto millionaire. You only need what a Bernie Madoff biographer described as a “well-defended mind.” And this isn’t all make-believe. With enough money you really can make your own reality and build a wall between yourself and a world that doesn’t play by your rules.

Given how complicated a story this is on anything but the most basic, crypto gold-rush level, it’s not too surprising that I had trouble keeping up with Bartlett’s narrative in places. The financial shenanigans were as opaque, and as deliberately opaque, as the crypto stuff. The whole enterprise was shell companies inside shell companies and money stuck into hidey-holes in secret accounts in tax havens all over the world. Curacao in the Caribbean, Vanuata in Oceania, Dubai. Again I had to wonder if even the experts who set some of this stuff up understood what they were doing. But complexity was the point.

The global reach of the scheme was amazing. Obviously there have been global criminal operations before, but the Internet really kicked this kind of thing into overdrive. All of Europe went into making Ruja: born in Bulgaria, raised in Germany, and with a master’s degree in Comparative European Law at Oxford (the prestige of which helped a lot). When OneCoin took off (or achieved “momentum,” as they say) it hit hardest in Malaysia, Singapore, and Hong Kong. From there it spread quite literally everywhere. “Nowhere symbolized the OneCoin craze better than Uganda,” Bartlett writes. The company grew in almost every country on earth, “but nowhere was quite like China.” Then, as the mature markets dried up in Europe, America, and Asia, growth continued in places like Colombia, Malawi, South Africa, Brazil, Trinidad, and Argentina.

As with global financial crises, a scam like OneCoin had no borders.

Despite a lot of it going over my head, I thought Bartlett did a great job telling the story and relating the essential points. He is sympathetic to some of the lower-rung investors while at the same time registering their culpability. He even draws a brief, devastating portrait of “MLM people”:

Despite their ostentatious conviviality, Konstantin [Ruja’s brother] noticed there was an emptiness to the MLM people he was introduced to. All they talked about was money: their cars, their new recruits, their Dolce & Gabbanas, their rank. Conversations revolved around the new downline they’d just opened or their weekly business volumes. Normal human interactions had been hijacked by a commissions parasite that turned everything meaningful into plastic talk disguised by self-help mantras about “first helping others.” They talked about the books they had read, not for enjoyment but to learn how to win friends and influence people. They met relatives for coffee, not to catch up but to propose an exciting new opportunity. Years in MLM does that to people.

Eventually it does it to Konstantin too. He starts out as a somewhat likeable guy but ends up infected with the dirt of the grift. It’s like another fall of man.

Noted in passing:

At one point Bartlett refers to Bulgaria as “the most corrupt country in Europe.” I can’t say this surprised me, but it did make me want to do a fact check since I don’t know what the most corrupt countries in Europe are.

There are different rankings and metrics available. It does seem that Bulgaria was ranking near the top of the corruption chart a few years ago (2019), but has since improved. Or maybe its change in position is more a relative thing. The most recent tables I found had Lithuania, Russia, and Ukraine all rating as more corrupt.

I’d also note that Europe scores well on these indexes and that globally the most corrupt nations are far more likely to be found in Africa, the Middle East, and Latin America.

This is another podcast that’s been turned into a book. There seems to be a lot of this happening, especially in the case of true crime. I’m not complaining, as it makes sense as a way of building interest and some of the books with such an origin have been pretty good (though most, at least in my experience, have been below average to downright poor). I just flag it here because it’s now become such a significant part of the evolution of publishing.

Takeaways:

Obviously, if it seems too good (the money too easy) to be true, then it probably is. Alas, this is a lesson that’s undercut by the everyday operation of our lottery economy. Why shouldn’t the legendary “little guy” get rich off the crypto gold rush? Why shouldn’t they get a break? Because, as a very wealthy investor once told me several decades ago about how to get rich in the stock market, the little guy is always the first to lose when there’s a correction and the market flushes out all the suckers.

True Crime Files