Two churches in the South Pacific are at the center of a fight between governments around the world and a beleaguered cryptocurrency called OneCoin, now accused of scamming its way to billions in revenue.
With its founders facing charges of fraud and money laundering, the crypto con went looking for a way into the tiny island nation of Samoa. It found one in Christian congregations where pastors could preach the wonders of a newfangled get-rich-quick plan.
“In these communities there is an enhanced sense of family and community bonds and with that comes a very strong sense of trust,” Auckland, New Zealand-based lawyer Campbell Pentney told Samoa News. “And of course, trust can be exploited by these scams.”
Though some investors from the Samoa Worship Centre Christian Church and an Auckland branch of the Samoan Independent Seventh Day Adventist Church (SISDAC) hold out hope to see their money again, the sense of exploitation is growing as hundreds of poor Christians who jumped at an opportunity endorsed by trusted leaders now call the scheme “risky” and “unprofessional.”
“If it seems too good to be true, it’s too good to be true,” Ed Moy, who directed the US Mint from 2006 to 2011, told CT. “Cryptocurrency in many ways is just a much more efficient mechanism [for making transactions], but a scam is still a scam.”
And for a scam that aimed to haul massive profits from behind a pulpit, believers looking for a miracle may have seemed the perfect target.
“The target of OneCoin is through the churches,” the Central Bank of Samoa (CBS) said in a statement last month. Though some church leaders claim they were victims, the bank concluded they knowingly engaged in fraud and that their accounts were used as part of a OneCoin money-laundering scheme involving more than $2 million.
An ‘old-school pyramid scheme on a new-school platform’
Cryptocurrencies like Bitcoin and Ethereum are the earliest iterations of a new kind of money and payment system. Fast, low-cost, and unhackable, the technology is the private sector’s answer to millennia of government-controlled currencies. Transactions are digital and are usually recorded using a technology called “blockchain,” a public record that decentralizes the regulation and movement of assets and promises security through total transparency and immutability.
Born out of the 2008 financial crisis, the cryptocurrency boom inspired many to create their own coins—with plenty of busts among them. (Conservatively, between 50 and 80 percent of cryptocurrencies that came out of the craze were outright scams, bad ideas, or good ideas that failed, according to Moy.)
OneCoin is among more than 1,600 cryptocurrencies created so far. But compared to more mainstream virtual token programs, OneCoin (also called OneLife) boomed quickly and was noted for having a particularly nebulous model.
Created in 2014 by convicted scammers Ruja Ignatova and Sebastian Greenwood, OneCoin took in $3.8 billion within two years, according to prosecutors. But there was a catch. Tech experts were calling it both a Ponzi and a pyramid scheme.
It had long been known that the revolutionary technology could also be used as a cover-up for crime, and OneCoin was accused of encouraging investment without offering a way to transfer, sell, or exchange funds, or a public blockchain by which it could be monitored.
“The pitch of the scam was, ‘We developed this coin; it’s going to be worth a ton of money; please invest,’” said Moy, the former Mint director.
While those behind the scheme were reaping rewards, experts say the cryptocurrency itself was worth nothing and couldn’t be used to buy anything.
“Cryptocurrencies themselves, in general, are not a bad thing,” Moy said. “But if you’re creating it out of thin air and there’s nothing to it and it’s the front for a scam, it just makes it a much more efficient scam. And because the volume of dollars is so much greater for electronic and digital transactions, crooks go where the money is.”
As early as 2015, financial authorities in Bulgaria, where OneCoin was born, warned of risks associated with the cryptocurrency. By the end of 2017, numerous countries had banned it, India had arrested 18 in connection to a OneCoin recruitment event, and Ignatova was charged with duping investors (Ignatova hasn’t been seen since 2017). Greenwood was arrested in 2018, and Ignatova’s brother Konstantin, who took over the company, was arrested in Los Angeles in March on charges of conspiracy to commit wire fraud.
“These defendants created a multibillion-dollar ‘cryptocurrency’ company based completely on lies and deceit,” Manhattan US attorney Geoffrey Berman said in a statement after Konstantin’s arrest. “They promised big returns and minimal risk, but, as alleged, this business was a pyramid scheme based on smoke and mirrors more than zeroes and ones.”
“These defendants executed an old-school pyramid scheme on a new-school platform,” added New York County district attorney Cyrus Vance.
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Source: Christianity Today