The cofounder and main promoter of the $4 billion OneCoin pyramid scheme was sentenced to 20 years in prison for his role in one of the first and biggest criminal frauds involving cryptocurrency.
(Bloomberg) — The cofounder and main promoter of the $4 billion OneCoin pyramid scheme was sentenced to 20 years in prison for his role in one of the first and biggest criminal frauds involving cryptocurrency.
Karl Sebastian Greenwood, 46, was sentenced in New York Tuesday, after pleading guilty in December of creating and promoting a phony cryptocurrency. Greenwood was the wingman of Ruja Ignatova, the so-called “Cryptoqueen” and most wanted crypto fugitive in the world.
Greenwoood’s sentencing closes one chapter of the OneCoin case, which authorities describe as one of the largest pyramid schemes in history. It impacted at least 3.5 million victims across the globe and foreshadowed a broader crackdown on crime in the cryptocurrency markets.
OneCoin generated 4 billion euros ($4.3 billion) in revenue and 2.7 billion euros ($2.93 billion) in profits between 2014 to 2016, but had no real value, according to prosecutors. It operated as a multilevel marketing network that paid commissions to millions of people worldwide for recruiting others to buy OneCoin packages.
The government said Greenwood personally made $300 million from the fraud, some of which he spent on properties in Spain, Dubai and Thailand, luxury travel on a private OneCoin jet, designer clothes and a down payment on a Sunseeker yacht.
Ignatova, the mastermind behind OneCoin, disappeared in 2017 as OneCoin came under suspicion and is still missing. She faces a 2019 US indictment charging her with fraud and money laundering. She’s on the FBI’s Ten Most Wanted list, with authorities offering a $100,000 reward for information leading to her arrest.
Greenwood was arrested at his home on Koh Samui, Thailand, in 2018 and extradited to the US. He faced as much as 60 years in prison. He admitted hyping OneCoin as competition to Bitcoin despite knowing it was a fraudulent currency whose value was arbitrarily set by its backers, not the market, and was used to lure victims into a multi-level marketing scam.
Greenwood, a Swedish citizen and father of four children, appealed to the judge for leniency, claiming he has accepted responsibility for his crimes. Greenwood said he suffered “extraordinarily harsh conditions” behind bars in Thailand and the US since his arrest.
Details of his imprisonment appear to have been blacked out by his lawyers in a court filing. He is a former employee of KPMG in Germany and worked for his parents’ advertising agency in Sweden.
OneCoin, which was based in Sofia, Bulgaria, targeted poor and financially unsophisticated people worldwide, according to prosecutors, including a victim in Uganda who sold his three goats to invest.
Prosecutors said most OneCoin victims are unlikely to get any of their money back, in contrast to investors in Bernard Madoff’s record $20 billion Ponzi scheme, most of which has been recovered for victims.
OneCoin used a network of money launderers who moved cash through banks in at least 21 countries, according to the US. Mark Scott, a former partner in the law firm Locke Lord LLP, was convicted after a trial in 2019 of laundering $400 million in OneCoin proceeds. Prosecutors claimed Scott set up a phony investment fund to process money from Ignatova. He has not been sentenced.
The case is US v. Greenwood, 17-cr-00630, US District Court, Southern District of New York (Manhattan).
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.