How the world’s biggest crypto-scam targeted British Muslims
Back in 2016, thousands of Brits thought they’d struck gold. Word was spreading through WhatsApp and Facebook groups about an exciting new crypto-currency called OneCoin. It was rumoured to be the next Bitcoin – that strange digital currency that had been shooting up in value and minting millionaires.
OneCoin’s founder, a Bulgarian-German businesswoman called Dr Ruja Ignatova had impeccable credentials – a degree from Oxford and a stint at the respected McKinsey’s. OneCoin, Dr Ruja said, was the ‘Bitcoin Killer’, heralding a financial revolution and, if you got in early, a unique new investment opportunity.
Driven on by the crypto hype, OneCoin reached 175 countries around the world, and over €4bn was poured in from hopeful investors. We estimate as much as €100m was invested between 2014 and 2017 from people in the UK. But as you’ve probably guessed already, OneCoin was an elaborate scam.
While investigating the company for the BBC Sounds podcast The Missing Cryptoqueen, we found that OneCoin has no value outside its own eco-system, and its ‘market price’ (currently €29.95, a huge increase on its initial ‘value’ of just 50 cents) is just a made up number, not a reflection of any real demand and supply. Two years ago, Dr Ruja herself was charged in absentia by the US authorities for wire fraud, vanished and hasn’t been seen since.
In its responses to the BBC, OneCoin rejects these allegations, saying ‘OneCoin verifiably fulfils all criteria of the definition of a cryptocurrency’, and that ‘Our wish and aim is the [OneCoin] is to be traded to much further extent’, but that trading of their currency is ‘being slowed down by authorities, regulators’ and, to use their words, ‘haters’.
We also found that one group in the UK was disproportionately affected: British South Asians – and Muslims in particular. During our investigation we received leaked OneCoin documents from an insider which listed all the user names of UK investors over a six month period. A significant proportion, on the face of it, seemed to be British South Asians. A whistle-blower later told us that British Asians were one of the main ‘circles’ of people that had invested, and that several of the top UK recruiters were British South Asians.
OneCoin was, and still is, sold using ‘multi-level marketing’ techniques – which encourage you to recruit friends and family to make a sales commission. If your recruits start selling, you make a cut on their sales too. MLM techniques aren’t illegal – big companies like Amway, Avon and Herbalife use them – but they can be controversial because usually only a small number of people at the top make a profit. MLM spreads through networks of people, which means the more close-knit the community, the faster they spread.
Within Islam there are certain restrictions on financial investments, mostly concerning rules about interest (which is not allowed). Ever since Bitcoin appeared, Islamic scholars have debated whether cryptocurrencies are permitted under Islamic Law. Mindful of this, OneCoin publicised a Shariah-compliant certificate, issued by the Pakistan-based Al-Huda Center of Islamic Banking and Economics. For British Muslims eager to get involved in the latest exciting opportunity, this was a great relief.
A Bradford-based scholar, Mufti Amjad Mohammed, started receiving phone calls and messages from uncertain Muslim investors, and decided to take a closer look at the Shariah certificate. It immediately troubled him. ‘There was no evidence of any research supporting the certificate’ he told me. After careful inspection of the OneCoin terms and conditions, he issued a fatwa – a religious ruling – saying that Muslims should not invest in OneCoin. Amjad was then approached by OneCoin who said they’d changed their T&Cs, so could he now please change his ruling? He wouldn’t: while admitting the changes seemed technically sound, he started investigating further, and published a YouTube video in which he still advised against Muslims investing, party because OneCoin could not be found on any cryptocurrency exchanges. The Al-Huda Center has since published a press release clarifying that it did not certify OneCoin as Shariah compliant.
Within the British Asian community it wasn’t unusual, Mufti Amjad thinks, for people who thought they’d found a life-changing investment to recruit their close friends and family into OneCoin. But that also means, he says, a lot of victims might not now go to the authorities, because the people who recruited them into the scheme are family members. According to our estimates millions of pounds has been lost by British Asians to OneCoin, and victims have told us of the untold harm it’s caused friends and families. But people are too ashamed to talk about it.
Financial fraud is one of the most common crimes affecting Brits – and is increasing every year. But OneCoin isn’t a straight scam, like credit card theft. It taps into a different instinct: the belief it’s possible to get rich quick. (We spoke to one investor who believed he was a billionaire, simply because he’d bought so many OneCoin.)
According to the Financial Conduct Authority £27m was lost by UK investors last year in ‘crypto’ or foreign exchange investment scams, with people typically chasing eye-watering returns. Potential OneCoin investors were often lured in by stories of ordinary punters who’d invested a few dollars in Bitcoin and ended up rich. The bigger question for society might be: why do so people believe such promises? Perhaps because we live in an economic system in which fortunes are made through gambling on crypto-currencies and speculative investments. In Silicon Valley it’s practically the entire business model. When it feels like the economy is a wheel of fortune, it’s a lot easier to believe that it might stop on you next.
Originally published at The Spectator.
See also Mufti Amjad Mohammed’s interview with TRT World.
See Mufti Amjad Mohammed’s fatwa here.