CHAPTER 8
MONEY TROUBLES
The myth that MLM sells to the world is that it’s easy. The Facebook ads and YouTube infomercials that promote “earning a few extra dollars on the side” and “writing the story of your future in the present tense” rarely mention the cold calls, the endless no-thank-yous, the subtle transformation of every lunch into a business pitch. Every few years, one of the big MLM companies is bundled into a lawsuit and—despite their lawyers’ best efforts—forced to reveal earnings data. That’s how the world knows that 87 percent of Herbalife (we give people a chance to have success and change their life) vitamin sellers earn a median annual income of just $637, and that the overwhelming majority of MLM participants make little to nothing at all.1 The bosses prefer to emphasize the tiny number of success stories: the one percenters like Igor or Juha.
The possibility that you might be the next Igor (if you just believe!) has lured 120 million people around the world into the industry, most of them women. (OneCoin was unusual among MLMs in that it was run by a woman but populated by men, the opposite of the norm.)2 Even those lucky few who make it to the top require a Stakhanovite work ethic. Igor had always been a 15-hours-a-day guy but after he returned from Macau (and a quick trip to Sofia, where he saw Ruja speak impressively at an event hosted by The Economist magazine), he started working harder than he’d ever worked before.
Although Igor was a pantomime act onstage, offstage he was diligent and calculated. He studied the different OneCoin packages, the token system, the mining. He analyzed the compensation plan and worked out the most profitable way to create a downline of sellers.3 (Igor never bought and then sold products—he built teams of sellers below him who signed up directly with whatever company he was promoting.) He designed PowerPoint slides that favorably compared OneCoin to Apple and Google, and started to believe he was part of a financial revolution. Some of this came naturally, because Igor described MLM itself as a form of “financial freedom” long before Bitcoin arrived. Each week, Igor taught new sellers in his downline the liturgy and craft of MLM: don’t firehose people with information; check that they are free before telling them about the opportunity; remember you are not selling a product but a lifestyle; don’t promote on your Facebook page—display your successful life instead.
OneCoin was the perfect MLM product. It had Juha’s simple comp plan, a non-physical product that grew in value, and a boss with a PhD in law. Better still, the Sofia HQ put out a never-ending stream of one-time-only special offers, which ensured a constant pressure to buy more. Periodically, the tokens people had purchased would double (the “split”) and, as the moment approached, there was always a sales rush. Another innovation was called “CoinSafe,” where coins were given as a “gift” rather than as interest, which was an important consideration for the company’s growing number of Muslim investors. The company even had a cleric from Pakistan issue a certificate, which said that CoinSafe made OneCoin compliant with Islamic Sharia law.
The only downside, at least as far as Igor was concerned, was America. A long-prepared July 4, 2015, “Independence Day” US launch was postponed because Ruja was wary of the Securities and Exchange Commission (the “SEC”) who were rumored to be planning a crackdown on cryptocurrencies. Nevertheless, there were still OneCoin promo events in the US that summer, even if they weren’t on the scale originally planned. But after the SEC announced in September that Bitcoin needed more regulation, Ruja decided the risk was too great and the company formally suspended all registrations from the US. (Some promoters continued to sell the coin anyway, telling investors to write down “US Virgin Islands” on their registration form.)4
Even without the US, there were plenty of other markets to conquer. In his first month, November 2015, Igor made €90,000. That was more than his best-ever month at Organo Gold. In December, it was €230,000. Even that was still some way behind Juha, who earned €1.5 million that month, which made him the number one MLM seller in the world. Fairly soon, Igor was earning €1,000,000 a month and he bought an eight-story mansion in an affluent neighborhood on the outskirts of Amsterdam, which used to be owned by John de Mol Jr., the billionaire creator of the reality TV show Big Brother. (Igor sometimes showed visitors the room where de Mol Jr. apparently had the idea for the program.) He purchased an Aston Martin and a Maserati, filled his garden with fiberglass life-size animals and installed a ten-foot-high wrought-iron entrance gate with the slogan “What Dreams May Come.”5 When groups of promoters turned up to train, Igor would always give a small tour of the indoor swimming pool, the sauna, the billiards room, the Swarovski crystals, his 200 plus shoe collection, his expensive watches-in-boxes, his hand-painted Dolce & Gabbana bags. It was a virtuous cycle—the more money he made, the more expensive stuff he bought; and the more expensive stuff he bought, the more people wanted to join his team.
It was the same story in Latin America, in Asia, in Africa. Top leaders were training teams of new sellers and making crazy commissions. Sebastian bought motorbikes, cars and a dozen luxury condominiums in Panama. Juha bought a private resort in Thailand. Kari, OneCoin’s sunglass-wearing “European Ambassador,” splashed out on cars, notably a yellow Ferrari 488, Bentley and Lamborghini Huracán.
But the real engine of the company was ten miles below Igor or Juha: it was the hungry promoters they trained and sent out into the world. By late 2015, there were roughly 20,000 active Diamonds, Rubies and Sapphires, between them responsible for tens of millions in sales a month. Some were professional sellers with a dozen years’ MLM experience who’d jumped companies, but many were enjoying their first taste of the industry, trying anything they could think of to drive sales. It wasn’t five-star hotels and private jets at the bottom—it was hard work day in, day out, as promoters sold Ruja’s promise in every corner on earth.
In the United States, a trio of Christian promoters ran twice-weekly webinars in which they claimed OneCoin was a “divine intervention” that had come to them directly from God. Despite Ruja’s ban on American sales, all over the United States people were hearing from friends and relatives about a new “opportunity”: a former winner of the Eurovision Song Contest for Israel from New Jersey called Estére Tzabar invested her late husband’s fortune; a well-respected oncologist from Montana called Donald Berdeaux invested almost a quarter of a million Euros in 2015 alone.6 Many American investors wound up in webinars hearing about Ruja’s CV and the $27 Bitcoin story. In August 2015, one of those prospects was Christine Grablis, a single mother in her fifties from Tennessee who’d saved up over €100,000, which she planned to spend buying a house. Christine, a devout Christian, quickly invested €25,000. Within a year, she’d invested every last dollar of her savings, and so had some of her friends.
Over in the UK, Layla Begum, a youth worker at a local council in London, attended a large OneCoin conference in Aldgate, not too far from her home. She’d been invited by a family friend and colleague from the council called Saleh Ahmed. Layla didn’t know anything about cryptocurrencies—she was only there because Saleh was a friend. But she noticed how well dressed and successful everyone appeared, and how most of the participants were Muslims, like her. She saw a persuasive Dutch guy called Igor Alberts onstage talking about financial independence and freedom; another speaker explained how he’d gone from dishwasher to millionaire. A third proudly showed the crowd OneCoin’s Sharia-compliant certificate. Layla jotted in her diary: “likable, professional yet humble, dress sharp, the rise of the financial revolution.”7 Shortly after the event, Saleh phoned her. “You’ve been working so hard,” he said. “I want you to be successful. I don’t want you living in a council house.” He told her an investment of €40,000 would, within just a few months, be transformed into somewhere between €300–400,000. Enough for Layla to buy the house she’d been saving for. She wired €7,500 over to Saleh’s bank account. “You’re making the best decision of your life,” he told her. Soon after the first investment, Layla bought another two Tycoon Trader packages and a Premium Trader. After a few weeks, the coins in her account had doubled in value. Her mother and brother quickly put in another €15,000.
It was the same everywhere. But nowhere symbolized the OneCoin craze better than Uganda. For years, MLM companies like AMGlobal and GNLD had been building a presence across the country. The products would often change—one month it was vitamins, then bed sheets, then vouchers—but the promise remained constant: There is opportunity open to anyone willing to work for it. In the big cities, everyone knew at least one person who ran an MLM side hustle. If an uncle or cousin called out of the blue, there was always a chance it was to convince you to buy the latest anti-aging cream or face scrubber. And even though there were always reports of people getting scammed, they were drowned out by the handful of testimonies of the lucky few that had become Shilling millionaires.
Dr. Saturday David gave up training to be a dentist and joined an MLM company selling vitamins. But, with all the local competition, Saturday found it difficult to generate sales. As soon as he heard about OneCoin—despite being clueless about technology—he made the switch.8 He’d been sold the same message as everyone else, but with an added African angle: OneCoin was a way to avoid extortionate remittance fees and untrustworthy banks (a quarter of Ugandan adults don’t have a bank account because they don’t trust them).9 David became the very first person in Uganda to promote OneCoin and started recruiting sellers. It was slow going at first but, pretty soon, doctors, health workers, teachers and farmers were quitting their day jobs and joining Dr. David’s downline. Within months, he had Rubies and Emeralds knocking on doors, armed with photos of Ruja. “This genius woman,” they would say. “She will make you rich.” By 2016, 50,000 people in Uganda had invested in OneCoin. Offices—and rival downlines—sprung up all over the country.
The pyramid went down and down, burrowing into small villages via friends and family. One of the new recruits in Uganda’s pyramid was Prudence, a pharmacist in her early thirties who ran a small and poorly stocked pharmacy in a Kampala slum where 60 percent of the residents don’t have access to drinking water. Like so many others, she put her day job on hold when someone told her she could become a “future billionaire” by selling OneCoin. Promoters above her gave her a fancy car and smart phone and told her to dress sharp and hit the villages. “Try to catch the farmers just after the harvest,” they said. “That’s when they have money.” Prudence found people were so desperate to join OneCoin that they were selling their homes, their land, their cattle, to put every last penny into the scheme.10 Prudence recruited Daniel, a smart and ambitious 22-year-old who lived nearby. Daniel sold his goats to buy OneCoin and then took the six-hour drive west from Kampala to his small village near Mbarara on the Uganda–Rwanda border. There, in his mother’s small concrete home in a village of no more than ten families, Daniel recruited his mother into OneCoin too. She was a plantain farmer who’d worked every day for 20 years on her small holding. Over the years, daily physical labor had taken its toll but she’d saved €4,000 to buy a maize store. Daniel told her all about Dr. Ruja’s vision: how money was changing, how crypto was the future. How they could soon buy ten maize stores if they invested now. Daniel’s mother didn’t really understand it. She couldn’t speak English and didn’t have a phone or computer. But in the end she bought a Tycoon Trader package and started to dream, too.
For investors, the fun part was planning how to spend the money when OneCoin went public. That was the phrase: to go public. It referred to the moment OneCoin would be listed on one of the major cryptocurrency exchange sites where it could be bought and sold for traditional money. Xcoinx was just a teaser—a boutique and unreliable website where investors could turn a few coins back into dollars or Euros. The moment OneCoin was listed on a big exchange, like Kraken or Binance, investors would be able to sell all their coins to members of the public at a huge profit.
From the beginning of 2015, Ruja promised this going public moment would be very soon. For those lower down the network who’d bought just one or two €5,000 Tycoon Trader packages, going public meant a holiday, college funds, cars, houses, clothes. For Daniel’s mother in Uganda, it was retirement. Layla Begum planned to buy a house and pay for a wedding. For Christine Grablis in Tennessee, it was a luxurious holiday and setting up a charity for mothers whose children had been abused. Sapphires and Rubies—the lower-ranked promoters who were usually struggling to get by in the real world—would meet at OneCoin events and be transformed into prospective on-paper millionaires, discussing what color Bentley they’d buy when OneCoin went public. And those near the top started to dream big. Igor Alberts thought he’d one day be “richer than Bill Gates,” having bought or earned millions of OneCoin. Dr. Saturday David, Uganda’s top seller, quickly accumulated €200 million worth of OneCoin and told friends he planned to build his own city called “CryptoCity,” which would run on OneCoin.
Greed or desperation alone doesn’t explain why OneCoin hit momentum so fast because those emotions are present in every MLM company, including the ones that fail. Something more powerful was at play: the fear of missing out… FOMO. Most OneCoin investors who put money in around this time said the same thing: They didn’t understand the technology but they’d heard of Bitcoin and regretted having not invested. When Bitcoin went stratospheric in 2013, stories proliferated of ordinary people making life-changing money not because of any particular skill or specialized knowledge, but because they got in early. The majority of these early investors weren’t destitute, but they were often just getting by. OneCoin felt like, for once in their life, they’d finally got a break.
The collective efforts of 20,000 “ranked” sellers—and tens of thousands more who had sold just one or two packages a month—drove sales to yet another level. The month Igor joined, November 2015, OneCoin passed €1 billion in revenue. What took Facebook six years, OneCoin had managed in 15 months. It raised almost €300 million in December alone. It was madness: Investors were turning up at the Sofia office with plastic bags full of cash to buy OneCoin in person. Someone from the finance team used to dash down to the reception and hand over a password for a pre-loaded account in exchange for the money, which was then put in a fridge-sized safe inside a secure room on the third floor. Soon the oversized safe wasn’t enough. Ruja even bought a flat in Hong Kong just to store cash. One room was stacked floor to ceiling with notes.
But the momentum driving OneCoin’s stratospheric rise was also becoming a problem. The company was growing too big, too quickly. It was felt most acutely at precisely 4 PM GMT every Monday. Promoters called it “Happy Monday”: the day commissions were paid. If a Ruby had persuaded a brother or cousin to buy a €5,000 Tycoon Trader package, they would find €500 (their 10 percent direct commission bonus) in their OneCoin account. (As per the comp plan, 60 percent was paid in Euros and 40 percent in OneCoin. Only the former could be immediately withdrawn.) If they’d followed Igor’s advice and managed to create a network of sellers below them, it could be five, ten, twenty times more. Sometimes promoters from a city all met up to celebrate the moment together.
Paying 20,000 OneCoin promoters spread over a hundred countries was a logistical nightmare. Roughly one third of all revenue went back out in commissions, and, on busy weeks, that meant moving tens of millions of Euros. In theory, it was simple: When someone bought a OneCoin package, they were given bank account details (often a OneCoin business bank account in Dubai) and told to transfer the money there. They were also given a code which ensured they, and their payment, were registered in the downline of whoever recruited them. Commissions were calculated and then transferred from a OneCoin-controlled bank account into the promoter’s personal account.
The bigger OneCoin became the harder it was to keep on top of this. At least once a month there would be a scramble as one of Ruja’s banks grew suspicious of the implausible volumes of money being moved, and froze transactions, which led to a mushrooming of new accounts. “We no longer accept payments in [Dubai] Mashreq bank account,” read one typical press release on September 8, 2015. “Please use the new bank details: OneCoin Limited, Noor Bank, DMCC Branch, Dubai.” Ruja was frequently in the office shouting down the phone at bank managers who’d refused a transfer or closed down one of the company accounts. “Money was her biggest headache,” one close associate later recalled. Too much was coming in. One Germany-based company called “IMS,” which processed payments for OneCoin, was receiving thousands of deposits from excited investors—its IMS bank account at Kreissparkasse Steinfurt took in €2.5 million in just two days, which caused the bank to file a suspicious money laundering report to the authorities in North Rhine-Westphalia. (This resulted in an IMS bank freeze in August 2016, although this was subsequently overturned.)
For a period, Ruja may have experimented with the shadowy world of Maltese gambling websites. Malta was a well-known “gateway” location to move money in and out of the European Union, and the tiny island nation had a thriving online gambling industry. Using a Bulgarian formation agent, Ruja or people close to her set up or purchased multiple companies in Malta all based at the same address: 1, Birds of Paradise, Mosta.11 These in turn were mostly owned by trust companies based on the tiny Caribbean island of Curacao. She also enlisted a Vanuatuan foreign exchange platform—where different currencies are traded—called SmartHubFX, run by a peripatetic money man from Mauritius. But most ingenious of all was how she fixed her money troubles in Dubai.
Ruja had several personal and corporate accounts in the Emirate. But as OneCoin’s growth went stratospheric in mid-2015, some of the banks there grew nervous. Her OneCoin corporate accounts at al-Mashreq Bank were suddenly receiving millions in unexplained payments each month from oddly named companies like “Swift Electronics Limited” and “World Creation Electronics Limited.” And money was going out almost as quickly: Sebastian Greenwood was paid €9.5 million in May 2015 alone, and another €5 million went to a company called Royal Yachts and Boats. By late autumn, trouble was brewing. In September, Mashreq Bank filed a “suspicious transaction report” to the UAE Central Bank, followed a few weeks later by Commercial Bank Dubai. On September 14, 2015, Ruja told Sebastian that she had “€50 million stuck in space” in Dubai. Frozen.
But Ruja had a brilliant solution, which was staring her in the face: Bitcoin. Around this time Ruja flew to Dubai to meet with a well-connected member of the Sharjah royal family called Sheikh Saud bin Faisal al Qassimi. Al Qassimi was in his mid-thirties, and was the son of one of the wealthiest men in the UAE. The younger man was a well-known technophile. Shortly after the meeting, Ruja and Sheikh al Qassimi are believed to have agreed to an audacious deal. Although disputed by representatives of al Qassimi, Ruja is understood to have sold OneCoin Limited to al Qassimi, and handed over three checks from Mashreq Bank totalling around 210 million Emirati dirham (roughly €50 million).12
In exchange, al Qassimi handed Ruja—over the course of several months—four USB memory sticks. On them were approximately €48.5 million worth of Bitcoin.13 A little later al Qassimi also appointed Ruja as “Special Advisor” to his New York–based charity, which may even have granted her some form of diplomatic status.14
Perhaps the Sheikh had a particular liking for this strange new cryptocurrency and hoped to get in early. Another possibility (which is challenged by lawyers acting for al Qassimi) is that the well-connected Sheikh could take over and unfreeze Ruja’s assets for himself while she would have access to digital money she could use immediately. Indeed, some months later, al Qassimi wrote to the attorney general of Dubai, explaining that Ruja’s bank accounts had been frozen without good reason, that he had a power of attorney over them, and that the whole affair is “an affront” to Ruja.15
No one, including Dr. Ruja, realized just how important this deal would become.
Bitcoin swaps in Dubai, Vanuatuan foreign exchange platforms, Maltese casinos owned by Curaçaoan trust companies: Ruja’s financial affairs were starting to look like a checklist of dodgy money deals.i Ruja wanted something more legitimate. Fortunately, she had connections who could help. Some years earlier, possibly during her spell at McKinsey, Ruja had met a Florida-based financier in his fifties called Gilbert Armenta. Bringing Gilbert Armenta into OneCoin would end up being the biggest mistake she ever made. But at the time he was exactly what she needed.
Footnote
i Maltese gaming sites in particular had a well-deserved reputation as being used by organized criminals to launder money: the journalist Daphne Caruana Galizia was murdered as a result of her reporting (among other things) on the link between gambling and organized crime on the island.