29 May 2018

China recovers $268 million in OneCoin cryptocurrency investigation

After a two-year investigation of a cryptocurrency scheme, 98 people prosecuted and $268 million recovered.

A local Chinese procurator’s office prosecuted 98 people and recovered 1.7 billion yuan (US$267.5 million) in connection with an alleged cryptocurrency pyramid scheme involving OneCoin, according to a report by China’s state-owned newspaper Procuratorial Daily. The investigation focused on alleged illegal practices influencing prices, including spoofing and flooding the market with fake orders to trick other traders into buying or selling.

Global investigation
The alleged pyramid scheme, which is thought to involve up to 15 billion yuan (US$2.4 billion), had been under investigation since July 2016 and was supervised by the Ministry of Public Security. Companies associated with OneCoin, the cryptocurrency founded by Ruja Ignatova, are being investigated in the UK, US, Ireland, Italy, Canada and the Ukraine. The OneCoin scheme involved 20 provinces in China. The Procuratorial Daily states details of the case are “complicated,” and the amount involved is “huge,” but the last four suspects in the case have now been prosecuted. At the end of last year, an initial arrest for selling OneCoin in Dunhuang, in the northwestern Chinese province of Gansu, was followed by 33 defendants being sentenced to four years in prison, and fined between 10,000 and 5 million yuan (US$1,565 to US$783,000).

Ban hard to police
China has been actively seeking to stamp out cryptocurrency trading completely and has banned foreign platforms. Last September, Chinese regulators banned Initial Coin Offerings (ICOs), describing them as an unauthorised illegal fundraising activity. In the same month, regulators also ordered Chinese cryptocurrency exchanges to cease trading. However, a report in the South China Morning Post states that because police authorities find it hard to determine the real value of the stolen crypto properties, cases have not come to a head until now. The OneCoin case falls into the category of an alleged internet pyramid sales scheme, which makes it different to the stolen cryptocurrency cases.