CHAPTER 4
MLM MEETS THE “BITCH OF WALL STREET”
Before the end of 2013, Sebastian persuaded John Ng to hire Ruja as BigCoin’s legal adviser, someone who could sort out the boring corporate stuff that Sebastian hated. John found her distant and guarded but he could see she was competent and valued the younger man’s advice. By early 2014, Ruja was spending several days a month in Hong Kong, co-ordinating her visits with Sebastian’s as the trio promoted BigCoin. While John took care of the overall strategy and direction of the new company, Sebastian focused on marketing and payments (he even created a new payments system called BigPay) and Ruja chipped in with legal, banking and corporate advice.
BigCoin was going so well that Sebastian was soon neglecting his other company, Loopium. Invoices started going unpaid. While he carried on promoting Loopium in public, Sebastian confided to a colleague that it was struggling. Despite a decent salary, one former friend recalls Sebastian travelling with a tatty old suitcase with broken wheels, and barely able to afford a replacement. Things got so bad that Sebastian even accused Loopium investors of trying to steal the company from him.1 He asked Ruja to help him formally wind Loopium up, which she did in April 2014.2 As far as John Ng was concerned, this was good news because it freed up more of Sebastian’s time to push BigCoin,3 but Sebastian and Ruja had different ideas.
It’s not clear at what point exactly Sebastian and Ruja decided they would steal John Ng’s idea, but the more they promoted BigCoin, the more they realized they could do a better job of it. From early spring 2014, the pair worked all day on BigCoin with John, and then secretly met each evening in the business lounge of the Harbour Plaza Metropolis hotel. Overlooking Hong Kong’s skyscraper skyline, they started to design their own, improved, version of BigCoin.4 There was a natural division of labor. With her perfect CV and banking know-how, Ruja could take care of the technology and be the respectable face of the new company, while Sebastian could build the MLM teams and drive sales. “You as the magic sales machine—and me as someone who really can work with numbers, legal, and back you up in a good and professional way,” Ruja told him via email. “We could really make it big—like MLM meets bitch of wall street ;-)”5
Privately, though, Ruja was nervous about MLM. The promoters she’d met at BigCoin were more like car dealers and budget motivational speakers than the business consultants and Harvard MBA grads she knew in Sofia. Nevertheless, people were arriving every day at the BigCoin office with their plastic bags full of cash. By spring 2014 Ruja and Sebastian didn’t have the tech to create a cryptocurrency, or even a network of sellers, but they did have an idea, and a name to match their growing ambition: OneCoin.
For all his gusto, Sebastian didn’t know how to create an MLM company from scratch, and most new firms collapse within a year unless they tempt established promoters to join. He told Ruja he needed an industry veteran to help him and already had someone in mind who was perfect: a balding, overweight, middle-aged, medallion-wearing motormouth from Sweden called Juha Parhiala.6
Juha wasn’t a natural salesman like Sebastian. When he was introduced to MLM by a friend in the 1990s, it took several attempts before he made enough money to call it a career. For a while he’d worked at the MLM coffee company Organo Gold, drumming up mediocre sales with his catchphrase “monkey see, monkey do.” But he was an enthusiastic showman who would bound on stage carrying a diamond-laced silver skull cane and roar passionately about whatever life-changing product he was selling that year. More importantly, Juha had moved to Thailand years earlier and had established a large network of MLM promoters in Asia who he could potentially bring into OneCoin to kick-start the new company. Almost as soon as he started plotting with Ruja in Hong Kong, Sebastian asked Juha if he’d like to get involved.
Juha Skyped Ruja, and she spent 40 minutes explaining the technology as simply as she could. All cryptocurrencies, she told him, run on a specialized piece of software called a blockchain, an immutable database that is updated every few minutes. It’s a diary of the coin, which publishes every transaction made by anyone anywhere using the cryptocurrency. And, thanks to some clever mathematics, no previous entry can ever be deleted from this diary. Cryptocurrencies are the future of money, she told him, which means anyone investing now will make a fortune.
Juha nodded along. And after he hung up turned to Sebastian with a confused look on his face.
“What’s she talking about?” he said. “Cryptocurrency? I don’t understand shit!!”
“Don’t worry,” Sebastian replied, laughing. “I’m going to teach you.”
“You’re going to teach me?!” said Juha. It was the blind leading the blind.
But Juha’s job wasn’t to understand OneCoin, it was to sell it. Sebastian promised him that, as the first recruit, Juha would be the top promoter in the whole pyramid, which meant he would make a tiny commission from almost everyone who invested after him. Sebastian’s promise did the trick—and Juha agreed to become OneCoin’s first formal recruit. He didn’t understand anything about OneCoin, and it didn’t matter either. MLM promoters don’t truly care what they’re selling, because their product isn’t really coffee or vitamins or cryptocurrency but the dream of a better life. In fact, the most important ingredient in a good MLM company is not the product, but the “compensation plan,” which determines how promoters will earn commission. Sebastian and Juha spent the summer in Thailand thrashing out the OneCoin comp plan, phoning Ruja as often as ten times a week. Juha sat at his grand wooden desk with a painting of a large white horse looming over him, trying to figure out what mix of incentives and bonuses would work best for a challenger firm selling a novel product. “With a new company,” Juha told Sebastian, “simplicity is everything.” They agreed on two main ways to make money. First, anyone who sold OneCoin should receive a 10 percent “direct sales” commission. Second, promoters should also get a 10 percent “business volume” commission based on all sales from anyone they recruit to join. It was simple but lucrative. Imagine that in week one Joey sells Stefan and Aisha €5,000 worth of OneCoin each. That’s €10,000 in total, and Joey gets 10 percent: €1,000 commission. Now let’s say that in week two Stefan and Aisha also both sell €10,000 worth of OneCoin. Stefan and Aisha each receive €1,000 sales commission. But here’s the magic: Joey, who recruited Aisha and Stefan, now has €20,000 worth of sales in his so-called “downline,” and gets 10 percent of that business volume: €2,000.7
Ruja quickly grasped the potential of exponential pyramidal growth. If the pattern above repeated itself ten times—two recruit two who recruit two who recruit two, then 2,000 people would invest €10 million and Joey at the top would make €1 million just by virtue of being there first. Juha and Sebastian threw in some other sweeteners, such as dispensing with the usual monthly fees or minimum product purchases that some MLM companies insist on.8 They also agreed that all commissions would be paid out 60 percent in real money and 40 percent in OneCoin.
There was a third way to make money too, of course, and that was the most important of all. At some point in the very near future, OneCoin would be listed on a cryptocurrency exchange site where it could be sold for real money, just like Bitcoin. And like Bitcoin, Ruja said, the value of OneCoin would quickly rise. That set OneCoin apart from every other MLM company. None of them—not Amway, Tupperware or Herbalife—sold products that increased in value.
By the end of summer 2014, the trio had agreed on the basic business model and sales pitch. OneCoin was the “next Bitcoin,” sold via MLM. Ten percent direct sales commission, 10 percent “business volume” commission, of which 40 percent would be paid in OneCoin. Investors could make commissions selling and recruiting, or simply by waiting for the value of OneCoin to increase. Ideally both.
There were lots of new cryptocurrencies. But, by combining MLM and crypto, OneCoin was targeting a new market: a non-technical audience that didn’t know anything about “mining” or “blockchains,” but knew about MLM and wanted to get rich. It probably helped that none of the founders were techies or computer geeks. OneCoin was a middle-aged MLM promoter, a smooth-talking PR guy, and a genius businesswoman with a background in banking. Ruja started confidently telling friends that OneCoin could become one of the biggest cryptocurrencies in the world. Maybe bigger even than Bitcoin.
While Sebastian and Juha finalized the comp plan, Ruja got to work creating the corporate structure for the new firm: websites, staffing, company registration, branding. She set up OneCoin Ltd in Gibraltar, which was owned by OneCoin Ltd in Dubai.9 She renamed some of her old Bulgarian companies and handed a couple over to her mother Veska. She incorporated a second Dubai-based company called RISG (probably an acronym of the founders’ names: Ruja Ignatova, Sebastian Greenwood), which would hold her personal wealth.10 She arranged for her book about investment, Learning for Profit—which had been written in 2013 just before she met Sebastian in Singapore—to be translated into four languages and reformatted to feature OneCoin branding. She also opened a modest HQ on Sofia’s famous Tsar Osvoboditel Boulevard and hired a few key staffers. The most significant were a pair of Bulgarians in their mid-thirties. An IT specialist called Momchil Nikov, with deep-set eyes and constant five o’clock shadow, was appointed Chief Operating Officer. His scruffy suits and loose neck ties disguised a sharp mind and professional work ethic, traits which were essential as he was tasked with building the company’s IT systems in double-quick time. Soon after, Ruja employed Irina Dilkinska, a quietly competent and discreet married mother of two. Irina held a degree in law from the Russian State University of Oil and Gas and was made OneCoin’s Head of Legal and Compliance, in charge of ensuring the firm followed the various laws and regulations relating to cryptocurrency and MLM.
As well as launching OneCoin, Ruja also needed to launch “Dr. Ruja.” She was ambitious and painfully clever but unaccustomed to the spotlight and not disposed to charming people who didn’t impress her. She was awkward onstage and lacked Sebastian’s easy charisma. But, as the face of a new cryptocurrency in a crowded market, Ruja needed to become the “Bitch of Wall Street,” as she had put it. She hung copies of her multiple university degrees in her office, and incorporated photos of them into corporate PowerPoint slides. “Dr. Ruja” started turning up to meetings dressed in over-the-top clothes and deep-red lipstick. According to the OneCoin promotional material published at this time, “Dr. Ruja” had done “consulting for cryptocurrency companies” and was “an expert in the new financial era—cryptocurrency.”11 In June 2014, she registered the domain name www.onecoin.eu. The landing page read: “OneCoin, the next Bitcoin. OneCoin is aiming for the sky.”12
“I am in,” Ruja wrote to Sebastian. “No going back now!”
With the corporate structure and comp plan in place, it was time for Ruja and Sebastian to extricate themselves from BigCoin. The same month that Ruja registered the OneCoin website, she and Sebastian flew to Hong Kong for a large BigCoin sales conference at the Kowloon Shangri-La hotel where she presented a smart idea for BigCoin investors to exchange their coins for shares in an investment fund she’d created called “CryptoReal Investment Trust.” But that was likely just a decoy to distract John Ng from the truth: that Sebastian and Ruja were on the verge of launching their own, rival, project.
As soon as Ruja returned to Sofia, she had one, final, job to do: building the all-important blockchain that would power the coin. Neither Sebastian nor Ruja (and certainly not Juha) knew how to do it. Not even Momchil Nikov, OneCoin’s IT expert, fully understood this mysterious new tech. Ruja instead contracted a Bulgarian IT firm, who in turn outsourced some of the work to some Indian developers, who “forked” the original Bitcoin blockchain (in other words, copied it and added a few tweaks to make it their own).13 Just as Satoshi Nakamoto decided at the very start there would only ever be 21 million bitcoin in circulation, Ruja had to decide how big OneCoin should be. Once that was programmed in, it would be set in stone forever. Ruja told her developers she wanted 2.1 billion coins. One hundred times more than Bitcoin.
In July, Sebastian was due to speak at a BigCoin event in South Korea. There was no phone call, no apology—nothing. He just didn’t turn up. A former colleague remembers that a few hours later, Sebastian sent John a photo of himself lying in a hospital bed covered in intravenous tubes. “I’m very sick,” he said. Before long Sebastian was back in Thailand working the phones with Juha, trying to persuade established MLM sellers to stop whatever they were selling and join his exciting new company, OneCoin.