China has prosecuted 98 people over a pyramid scheme involving a cryptocurrency called OneCoin. The scheme has been subject to a long-running investigation that started in 2016. It involved a sum of 15 billion Yuan or about US $2.4 billion.
The scheme is also being investigated in several other countries including the US, UK, Ukraine, Canada and Italy according to South China Morning Post.
According to a report, the pyramid scheme had spread to 20 provinces. The case is said to be complicated and involves a substantial sum of money. The last four suspects have now been prosecuted, according to authorities.
According to the procurator’s office, 33 of those accusecd have been sentenced to four years in prison with fines of between 5000 and 10,000 Yuan.
Local reports indicate that about $268 million worth of OneCoin cryptocurrency has so far been recovered by police.
Cryptocurrencies Banned in China
Cryptocurrency trading was banned in China in 2017 after the phenomenon gripped a huge part of the population. Cryptocurrency exchanges were ordered shut cutting off a huge cryptocurrency market.
Initial coin offerings were also banned and there is a plan to eventually close all cryptocurrency mining operations. China accounts for a huge part of cryptocurrency mining, the process of verifying transactions on blockchain.
Initial coin offerings is a new way of crowdfunding in support of a blockchain project in exchange for tokens. Contributions are usually made in bitcoin and ethereum. The phenomenon was at an all time high in 2017 before governments started cracking down.
Remaining exchanges like Bitfinex still have operations in Hong Kong, a semi-autonomous region although plans to shift to a different location are underway.
This method became popular because of the ease with which funds can be raised, without the usual regulatory rigour.
OneCoin is promoted by offshore companies associated with Ruja Ignatova. These include OneCoin Ltd and OneCoin Network registered in Dubai and Belize respectively. It relies on a wide range of promoters with the organisational structure of a typical Ponzi scheme.
In 2017, Indian authorities were among the many jurisdictions that had prepared charges against Ruja Ignatova, the public face of the scheme.
OneCoin brands itself as selling cryptocurrency trading educational material which come in various levels.
The packages also come with tokens which can be used to mine “OneCoins.” OneCoins are supposedly mined in Bulgaria and Hong Kong. There no exchange that lists the coins. OneCoin’s own exchange, OneCoin Exchange was shut down in 2017.