This week’s article is called Cryptoqueen: How this woman scammed the world, then vanished.
It is about a Bulgarian entrepreneur who co-founded an impressive cryptocurrency operation that turned out to be a scam:
Between August 2014 and March 2017 more than €4bn was invested in dozens of countries. From Pakistan to Brazil, from Hong Kong to Norway, from Canada to Yemen… even Palestine.
The article is pretty wild, and I encourage you to read it, even if you usually have no interest in cryptocurrencies.
What’s the Link to Personal Finance?
This is relevant to personal finance, in that it’s a good reminder to:
- not treat cryptocurrencies as an investment;
- don’t ask your friends, family, and neighbors to buy cryptocurrencies with you;
- especially, don’t ask your friends, family, and neighbors to BORROW money, so that they could buy cryptocurrencies with you.
Just take a look at these quotes from the article, to see why.
Some people convinced their friends and family to buy in as well:
“Before long, she had invested €10,000 of her own money - and persuaded friends and family to invest €250,000 of theirs.”
Sometimes the amounts are significant to the victim:
To buy the packages some sold their cattle, their land, and even their houses - with disastrous consequences.
The consequences can be significant too:
Some are running because they got loans from a bank. Some are hiding. Some are divorced.
And then there’s this part, which sounds like a scene from a movie:
One of the main OneCoin offices in Kampala is attached to a church. There are videos of the minister, known as Bishop Fred, leading the congregation in call and response. “One Life!” he shouts. “One Coin!” the congregation’s replies.
But Was It REAAAALLLYYY a Scam?
Raising $4bn+ is no small feat. Could it have been a scam? Could something come of it one day?
It’s probably a scam, yes, when people have collectively spent $4 billion on a product that doesn’t exist:
It was a cryptocurrency company, and it had been running for a while - but it didn’t have a blockchain.
For the record, a blockchain is what enables all the claims about cryptocurrency (“decentralized”, “independent”, “revolutionary”). A cryptocurrency without a blockchain is little better than, let’s say… a cheque.
While one might reasonably assume this would make the cryptocurrency less desirable, one would be wrong:
as a “centralized, closed source cryptocurrency” with “strict” anti-money laundering and know-your-customer rules, OneCoin “is much more compliant than decentralized [cryptocurrencies].”
Lacking a blockchain just makes it centralized (and thus more compliant) 🤷♂️
(brb starting a new centralized cryptocurrency using Google Sheets)
If you enjoy the cryptocurrency scam genre, here is another good one: The Strange Tale of Quadriga.
Related to cryptocurrency scams in general - there is this aptly named website: Days Since A Cryptocurrency Exchange Has Lost More Than $100 Million.
Finally, here is a statement by OneCoin, denying that it has been used to launder money. It is a good read, if you enjoy self-victimization.