Most investors believed a OneCoin blockchain existed, even if they didn’t fully understand the technology itself. So did the majority of the Sofia staff and Ruja’s small army of advisers. Why wouldn’t they? OneCoin was a multi-billion Euro firm that had sold coins to a million people. On the surface it had everything a cryptocurrency firm needed: audit reports, legal letters, an exchange site, magazine covers and enough money to pay for any technology they wanted. So how was it possible that Ruja was launching a blockchain that hadn’t even been built?
Maybe only Ruja herself will ever know the full story. But attempting to answer that question might also unlock the secret to Ruja’s motives. The available evidence suggests she was trapped by a blend of success, hubris and irony.
When OneCoin was first launched back in 2014, lots of cryptocurrencies were being created and marketed, often accompanied by unrealistic promises of guaranteed returns. They mostly got away with it too because the law hadn’t caught up with this nascent industry. In many ways, OneCoin was just one of a hundred other get-rich-quick crypto schemes. But events turned it into something quite different.
Bitcoin creator Satoshi Nakamoto was obsessed with the idea of “decentralization.” He thought many of the world’s problems were caused by too much power accumulating to a tiny number of people in government and big banks. Bitcoin’s fixed number of coins—the 21 million released (or “mined”) at a pre-programmed rate that even Satoshi couldn’t change—was designed to disrupt it. Ruja wanted OneCoin to be part of the same family. Based on the available evidence, OneCoin had commissioned a blockchain when it was first launched in January 2015—most likely a replica of the Bitcoin technology, except far bigger and faster: 2.1 billion coins being generated at 10,000 per ten minutes. The problem was that selling crypto via MLM turned out to be too successful. Her persuasive MLM promoters, the inspired compensation plan, and investor FOMO combined to create a momentum that exceeded even Ruja’s expectations. One possibility is that by early 2015, her blockchain couldn’t keep up. Pretty soon Ruja was selling far more than 10,000 new coins every ten minutes. And during the summer of 2015 OneCoin mania, every morning Ruja woke up to find hundreds more Tycoon Trader packages had been sold, containing millions of coins that hadn’t actually been created yet. “This is the implication from the big sales 4 weeks ago,” Ruja wrote to Sebastian on August 6, 2015. “1.3 [billion] fake coins. We are fucked, this came unexpected and now needs serious, serious thinking.”1
The email to Sebastian implies there might have been a blockchain of sorts in there somewhere, at least at the beginning. But nine months after the January 2015 launch event, Ruja had sold over one billion coins that were not recorded on her blockchain. Numbers appeared in investor wallets just like the “real” coins, but they weren’t backed up by the tech. On the available evidence it seems probable that Ruja scrambled a team to store these “fake” coins on an “SQL” database—basically a glorified Excel spreadsheet. Because no one other than Ruja and the IT team were allowed to see the blockchain, it was impossible for investors to know the difference. She might have had a “real” blockchain: but for months she was selling coins that didn’t exist.
Having sold over a billion non-existent coins, Ruja could have stopped activity and waited for her blockchain to catch up. But at the rate of 10,000 coins every ten minutes, it would have taken roughly a year for her blockchain to create the one billion coins that investors had already bought and believed were safely in their wallets. That would have killed the momentum that sellers like Juha and Pehr Karlsson had worked so hard to create, which in turn would have destroyed the company.
In truth, OneCoin was never going to succeed. The mining was fake, and so was the price. But what Ruja did when she realized the full extent of her “fake coin” problem was a critical turning point. Shortly after the “we’re fucked” email to Sebastian in 2015, investors were briefly prevented from withdrawing their money on the exchange. Maybe this was the moment Ruja surveyed her options: Should she come clean? But within days, and without any fanfare, she decided to keep selling and pretend nothing was wrong. The exchange went back online and started periodically paying out again, while promoters continued to sell as fast as before. Just five days after Ruja emailed Sebastian, Christine Grablis from Tennessee bought €15,000 worth of OneCoin packages. It was all thin air.
When Ruja and Sebastian first discussed OneCoin in 2014, she told him her expertise lay in the “gray zones”: those areas where the rules are fuzzy and technology has outpaced the law. Every day she sold coins she didn’t have, Ruja moved further out of the gray zone. The most likely scenario is that, in 2014, Ruja and Sebastian spotted an opportunity. Both cryptocurrency and MLM were infused with “fake it till you make it” culture, where hyped up promises of future profits were normal and failure largely went unpunished. The original plan may have been to pull in lots of initial investment on the basis of future Bitcoin-style price rises, then list the coin on a crypto-exchange with a fake starting price and allow the open market to drive the price down to zero, thereby wiping out any liabilities they owed. This would have been a swift and relatively moderate wheeze, and one which investors and the authorities might have struggled to do much about. By the time of the OneCoin corporate event in Macau in September 2015, she knew full well she’d sold a billion fake coins. And yet she stood in front of 5,000 people wearing a $1 million necklace and proclaimed, again, that OneCoin was the “future of money.”
Why didn’t she simply walk away in late 2015? She might have admitted to over-promising, even creating a fake price: but who didn’t hype things up in this industry? No one will ever know for sure, but Ruja had become accustomed to her new life of money and influence. She loved the luxury homes, cars and million-dollar shopping sprees. Suddenly a lot of people depended on her too: She had staff all over the world, some of whom were old friends, and thousands of promoters. Having worked so hard to finally realize her potential, maybe she just didn’t want to give it all up. Extreme hubris likely played a part, too. Ruja was supremely self-confident, a character flaw made worse by the constant adoration. “She always thought she could fix everything with money,” one close adviser said later. It’s likely that she believed she could somehow patch over this “fake coin” problem. Indeed, through much of winter 2015, Ruja searched for a way to reconcile her “real” blockchain coins and her “fake” coins. And by the end of 2015, she thought she’d found the answer: the “new blockchain” plan, which she announced at the June 2016 London event.
But Ruja hadn’t reckoned with the imperatives of this new technology. Each new block of OneCoin transactions started, just like Bitcoin’s, with a mathematically crunched version of the block before it, which linked them all together into a single unbroken chain. Old entries couldn’t be changed or retrospectively added. The fixed supply and immutable ledger of records that underpinned Ruja’s promise of a financial revolution were also what prevented her from reconciling her real and fake coins. Ruja needed a first-rate technical specialist to help her solve this riddle. OneCoin’s COO Momchil Nikov was a decent IT guy. She had other developers too, like Ivan Slavkov who ran a local IT firm. But perhaps they didn’t possess the blockchain expertise needed for such a tricky job and so, in the end, she was forced to contact Bjørn Bjercke. She hoped that he could take her “fake” SQL database entries and retrofit them onto her new blockchain. If this was done cleverly, maybe no one would be any the wiser.
Unfortunately for Ruja, she’d chosen someone who was a true believer in blockchain technology, and he now wanted to know what exactly Ruja had “launched” in Bangkok. If it wasn’t a new blockchain, then what the hell was it?