CHAPTER 5
WE SELL EDUCATION!
Bangkok, August 2014
Ruja decided that the OneCoin blockchain would be officially launched in January 2015, but she wanted to start selling right away. All summer, Sebastian and Juha worked the phones—“I’m going to make history!” Juha told old contacts and former colleagues—but signing up new sellers to push OneCoin was hard work. None of them had ever heard of cryptocurrencies and they were quite happy selling vitamins and energy drinks. The only recognizable name Juha landed was a British promoter in his fifties called Nigel Allan. Nigel had been in the industry since the 1980s and had done stints at several top MLM companies, including Herbalife.1 Nigel was at a loose end after the collapse of his company Brilliant Carbon, which sold carbon offsetting via MLM, and he agreed to become OneCoin’s first president.
Pehr Karlsson and Petri Välilä—two Scandinavian MLM sellers in their thirties that were contacts of Juha—also liked the idea.2 Sensing the chance to get her sales team moving, Ruja flew the pair business class from Helsinki to Bangkok to persuade them to join the fledgling company.3 But when they arrived to learn about this exciting new digital money, it would have been apparent they weren’t technically selling cryptocurrency after all.
Everyone knew “the rules.” They were stamped into the brain of every MLM promoter. The rules were what distinguished legitimate MLM companies like Amway or Tupperware from illegal pyramid schemes like Business in Motion or Speedball. Pyramid schemes are the evil cousin of MLM—an investment scam where promoters sell a non-existent product, and make commission through an endless cycle of recruitment. Speedball, for example, sold an “opportunity” to invest in some clever-sounding tax minimization scheme, which turned out to be non-existent.4 But thousands of people signed up, recruited others and banked commissions. MLM critics argue there are more similarities than differences, but ever since a landmark 1979 ruling by the Federal Trade Commission, MLMs have stayed on the right side of the law by (broadly) selling real products to real consumers. Amway’s products, for example, include high-quality cleaning products and wildly popular nutrition supplements, while Tupperware is so successful that the brand is synonymous with the plastic containers it sells. Both companies also make sure that the majority of promoter earnings come from direct sales rather than recruiting new promoters.
OneCoin’s problem in 2014 was that cryptocurrency was so novel that no one knew whether it would count as a “real product” or not. It was also rumored that the American and Chinese authorities were considering classifying cryptocurrencies as “regulated assets,” which would make selling them akin to trading stocks and shares, which was a legal minefield.
Juha and Sebastian’s plan was to sell education instead. Sebastian explained to Pehr and Petri that OneCoin’s product, the thing the promoters would technically sell, was five education “packages,” which consisted of training videos and a lengthy PDF full of advice and information about finance, investment and crypto. The coins were free with each package. (To be precise, investors received free “tokens” with packages, which could then be turned into coins via another of Satoshi’s ideas, called “mining.”i “This concept of converting tokens into OneCoin is an important phase for validity and truth,” Sebastian told Ruja in August 2014. “Mining of coins is a concept that is very familiar in the industry.” OneCoin tokens also doubled every few weeks, which was designed to incentivize investors to keep tokens inside the company rather than trying to turn them into coins and sell them immediately.)
The cheapest package was the “Starter Pack,” which cost €100. With that came one education PDF and 1,000 tokens, which could be turned into approximately 200 coins (although, thanks to the doubling of tokens, known as “splits,” that could increase over time to as many as 600). Each package was more expensive than the last—Trader, Pro Trader, Executive Trader and finally Tycoon Trader, which cost €5,000 and came with all five educational PDFs. The Tycoon Trader came with as many as 48,000 OneCoin.5 Although the website claimed the education packages were “for those who want to bring their trading skills to the top level,” the PDFs were poor quality and contained barely any useful or original information. (“We all know that life has its own ups and downs and that we eventually have to face them,” read one. “If there are no ups and downs in your life, then you are probably dead.”)6 What investors were really buying was the “free” coins that came with them.7 True, 48,000 coins were worth precisely zero at that time. (In fact they wouldn’t even technically exist at all until the blockchain was launched.) But the hope was to follow Bitcoin’s trajectory. The Scandinavian pair didn’t know much about crypto but they did know about MLM. OneCoin’s comp plan was generous and simple and the tech was exciting. It sounded like something they could sell.
Although there was still no public blockchain, by late August 2014, Nigel Allan, Juha and the two Scandinavians were marketing OneCoin packages. Petri had returned to Finland and created a small team, who set up a website and ran some online ads. Nigel Allan called some contacts and hosted online seminars while Juha posted in Thai expat Facebook groups. They were working like dogs, but most people had no interest in sending €5,000 to a Bulgarian cryptocurrency in exchange for coins that didn’t exist yet. Only €20,000 was invested in August, which barely covered the cost of running the Sofia HQ. Some staff weren’t getting paid and according to one early investor, Juha started offering free packages to anyone who agreed to join.
The very first OneCoin event took place on September 27, 2014, in Helsinki. By that time, OneCoin had only sold 27 packages, mostly to investors in Finland or Sweden.8 Ruja—who was starting to worry that she’d been right all along about MLM—promised Pehr that if he could convince 50 people to attend an event, she’d fly over from Bulgaria to speak. Somehow he managed it and, in a very ordinary conference room at the Marina Congress Centre, Ruja confidently described for the first time how OneCoin would become one of the top three cryptocurrencies in the world. Although the attendees weren’t sure what to make of this crazy-sounding billion-dollar promise, they were excited by the vision and unshakable self-belief of “Dr. Ruja.” Pehr must have spotted something in the crowd’s reaction. After the event, he bet Ruja that OneCoin would have 10,000 members before the official launch in January 2015.
The single most important word in MLM is momentum. It happens when a team is big enough to start growing by itself, just like when a virus reaches an unstoppable tipping point. Most new MLM companies never reach that moment and peter out within a year or two. Everyone, including Ruja and Sebastian, feared that OneCoin might collapse before it even started.
After the Helsinki event, something strange started to happen. There was no single defining moment, no sudden change of wind or dramatic news story. But word started to spread just like Pehr and Sebastian had predicted. Friends heard from friends that there was an exciting new crypto from Bulgaria. The handful of OneCoin promoters noticed that their evening sales pitches were getting a warmer reception, and their cold calls, which had previously been met with silence, now elicited cautious curiosity: Is it like Bitcoin? Do you really think it’s legit? Am I definitely going to make money? Pehr and Petri picked up steam, some of Nigel’s old colleagues signed up, as did a handful of BigCoin defectors. One day in early October 2014, Ruja logged on to see that someone in American Samoa had bought the €5,000 Tycoon Trader package. The next day it was some Starter Packs in Finland and a Pro Trader package in Estonia. Then Malaysia, then Spain, then Singapore, then Germany, then… she didn’t know how they’d heard about her coin. Word of mouth? An online seminar? A Facebook message between family? That was the genius of MLM: she didn’t need to know. It was growing itself.
Within weeks, Ruja and Sebastian were getting contacted by OneCoin promoters all over the world, desperate to have the founders visit their city and hype the coin. In early November, Sebastian and Ruja organized a one-week tour to a corner of the world where OneCoin was taking root more than anywhere else: Malaysia (including Kuala Lumpur), Singapore and Hong Kong.
“I cannot sleep. I cannot sleep!” Sebastian said to 150 potential investors who’d packed into the second floor of the grand Merdeka Hotel in Kuching, Malaysia, on November 7, 2014. He patrolled up and down the large room holding a microphone in one hand and slideshow clicker in the other. “OneCoin is a once-in-a-lifetime opportunity, just like Bitcoin was a once-in-a-lifetime opportunity!”9
The crowd nodded along. They were as excited as Sebastian.
Although it would be tweaked slightly in the coming months to fit circumstance and audience, the basic sales pitch Ruja tested on this first tour hardly changed for the next three years. It pivoted on a single powerful argument: Bitcoin was good but OneCoin was better. Ruja had taken all Bitcoin’s problems and fixed them.
Bitcoin was complicated—users needed, for example, to create their own “wallets” and manage their own “private key” to make it work. OneCoin was simple: All you needed to do was sign up on the website—and by signing up you could learn about this strange new world too. In Malaysia, Ruja called it “the people’s coin.”
Bitcoin was about speculation and high-powered traders. It was slow and inefficient. But OneCoin was about everyday use: In the future shops would accept it. One day there would be OneCoin credit cards and an exchange site where investors will buy and sell OneCoin easily for real money.
Bitcoin was decentralized and anonymous, which was why criminals and anarchists liked it. But OneCoin was centralized and monitored. Sofia HQ knew exactly who signed up, ran anti-fraud “Know Your Customer” checks, and controlled the blockchain to make sure it wasn’t misused. OneCoin was Bitcoin minus the crime.
Bitcoin’s founder was the faceless alias Satoshi Nakamoto who had vanished without a trace. OneCoin’s founder was in plain sight with a degree from Oxford. “It’s not every day you meet a person like this… especially not in this [MLM] industry,” Sebastian said to the increasingly enthusiastic audience. He had a knack for spotting doubts and seeing them off at the pass. Ruja smiled meekly.
It was true, too. Ruja wasn’t like other MLM sellers. There was no brashness or bravado, just cold logic and common sense. That made her argument even more powerful: in every way, OneCoin was superior to Bitcoin.
While Ruja explained the tech and the vision, Sebastian was left to close the deal. Although the coin didn’t technically exist yet, Sebastian told the room that when the OneCoin blockchain launched in January 2015, the company would also set up an internal currency exchange site called “OneExchange” where investors would be able to trade their coins for Euros. The price, he said, would be €0.5 per coin. OneExchange was an internal market, designed for OneCoin users to sell to each other. But, one day, Ruja and Sebastian promised, the coin would “go public.” In other words, get listed on a large, public exchange for anyone in the world to buy or sell.
No one asked Sebastian how he knew in advance what the price would be. Ruja had already said something about “demand and supply” but the audience were already busy doing the math in their heads. A Tycoon Trader package, which cost €5,000, came with 48,000 coins, each one soon worth €0.5.
“Invest €5,000 now,” said Sebastian excitedly, “and you are pretty much guaranteed €24,000 within three months.” And that was just the starting price. “Can you imagine how quick the price of this coin can go up because of the amount of people we have?” Sebastian asked, rhetorically. Of course they could! It was impossible to think of anything else. Ruja had spent the last hour explaining why OneCoin was superior to Bitcoin. If OneCoin reached the same price as Bitcoin, a €5,000 Tycoon Trader package would be… well, it would be worth millions of Euros.
Was it so ridiculous? People in the audience had read articles by the New York Times and the Guardian about how crypto could be the future of money. They thought about that Norwegian guy who bought $27 of Bitcoin in 2009, which was worth almost $900,000 four years later. They’d missed out on Bitcoin and didn’t want to miss out a second time. Almost 700 people signed up to OneCoin from Malaysia the month Sebastian and Ruja visited. The pair repeated the same schtick in Hong Kong and Singapore. Each time they were greeted at the airport by a small band of enthusiastic new followers desperate for selfies, before being driven to a conference room full of restless “prospects.” When Ruja returned to the European winter, and Sebastian headed back to Bangkok, they left behind a cohort of converts who were both investors and promoters, thrilled to be part of Ruja’s financial revolution, and getting rich in the process.
Having seen the energy and enthusiasm that her new coin was generating, Ruja installed a member counter in the Sofia HQ. Each time a local promoter put on an event—a seminar in Germany, a meet-up in Tokyo—staff would notice an uptick, as people bought a Tycoon Trader one week and started selling Tycoon Traders to friends the next. In November 2014 alone, nearly 2,000 people invested over €1 million in Australia, China, Estonia, Laos, Malaysia, Singapore, Pakistan, Norway, Romania, the United States… and the stories starting trickling in. People were selling their cars, going without food, taking out bank loans. All to buy more OneCoin.
As the coin grew, so did the Sofia HQ. It transformed from a temporary work space to a fully gassed tech start-up, with staff in their twenties and thirties buzzing around laptops and coffee machines. “It was an exciting place to be,” one employee later recalled. And unlike most technology firms, the place was run by women: in addition to Ruja, there was Irina Dilkinska, the head of legal; Veneta Peeva, head of finance; Jacqueline Gotcheva ran marketing; and Ruja’s old friend Maya Antonova was on accounts. And wandering around the office muttering under her breath in Bulgarian was Ruja’s mother, Veska, who became an unofficial PA.
It wasn’t only OneCoin on the move: “Dr. Ruja,” the carefully constructed cryptocurrency guru, was also becoming a minor celebrity. Even for a short meeting with staff, she dressed like she was attending an evening ball. In late November 2014, she won the Bulgarian Businesswoman of the Year Award at a glitzy event in central Sofia and flew a couple of the Finns over to celebrate, as well as her husband Björn Strehl. “In two months we’ve done over €2.5 million,” she said in her acceptance speech, which switched seamlessly between English and Bulgarian. “We are amazing and we’re here to stay.” Her parting words paraphrased one of her heroines, Marilyn Monroe: “It’s a man’s world but I love being a woman in it.”
It wasn’t all smooth sailing, however. Ruja was less well received the morning after when she attended a meeting of Sofia’s small but serious Bitcoin community. Ruja listened as developers discussed the problems Bitcoin was facing at that time: drug dealers on the dark net were giving the coin a bad rep; hackers were stealing people’s coins; and the press seemed determined to criticize everything about this nascent currency. Ruja confidently told these technical specialists that she was a former McKinsey employee who had built “a better Bitcoin.” But no one was interested in her ideas about a new cryptocurrency. “She was very cocky through the whole two days,” recalled one unimpressed attendee, who thought she was “talking bullshit.” But Ruja left the event more convinced than ever that OneCoin would eventually topple its better-known rival.10 In fact, shortly afterward, she lost her bet to Pehr Karlsson. As the OneCoin ticker clocked past its 10,000th member a few days before Christmas, there was a loud cheer in the office and Ruja threw a party to celebrate. They’d hit momentum.
Footnote
i One of Satoshi’s innovations with Bitcoin was the way new coins were created. Anyone who dedicated his or her computing power to verifying the transactions in the blockchain would compete to earn a very small amount of new Bitcoin. They did this by cracking a math puzzle, and the winner would be rewarded with a few new coins. Over time, the puzzles would get harder to maintain a steady and predictable supply of coins. OneCoin had a similar system: Each investor received tokens, which would then be used to generate the new coins, and the number of tokens it took to “mine” new OneCoin gradually increased. While Satoshi’s mining system was in order to keep supply constant, OneCoin appears to have been designed to incentivize sales.