Did the FCA withdraw scam warning after legal threats?

An article in Private Eye about the cryptocurrency Ponzi scheme OneCoin caught my eye last week.

OneCoin was one of the earliest and biggest cryptocurrency Ponzi schemes. You handed over money in exchange for OneCoin tokens, which OneCoin and its agents claimed would steadily increase in value, allowing you to cash in your tokens later for more money (or money’s worth).

Large recruitment commissions were also paid in a multi-level marketing (aka pyramid) system.

OneCoin never made any serious attempt to claim that it had external revenue to fund its ability to pay investors more than they’d invested – plus recruitment commissions. Using new investors’ money to allow existing investors to cash out more than they’d invested, while also paying multi-level commissions, made it a Ponzi scheme.

The Ponzi element collapsed in early 2017 as withdrawals exceeded the money left in the system and OneCoin closed its “exchange”. The scheme continued to limp on as a pure pyramid; victims were encouraged to continue exchanging money for OneCoin tokens in the hope the exchange would someday re-open.

So far, so cookie-cutter cryptocurrency Ponzi scam.

OneCoin is believed to have taken in £4 billion from investors around the world, of which about £100m came from the UK, mostly ethnic minority Muslim enclaves, in an example of “affinity fraud”.

In affinity fraud the scammer convinces the mark to invest on the basis that they should trust him as a member of their community, instead of the mainstream financial and legal system. Often the community is a religious one whose members have already been groomed to trust community leaders over facts and reality.

One UK OneCoin recruiter / victim, Jen McAdam from Glasgow who says she and her family lost six-figure sums in OneCoin, made a series of YouTube videos calling out the scam.

OneCoin hired notorious defamation experts Carter-Ruck to send her a letter claiming they “refute all allegations that they are offering a scam” and that McAdam should remove her videos or face expensive legal action.

McAdam stood her ground, declined to remove her videos and heard no more from Carter-Ruck.

So far, still so cookie-cutter cryptocurrency scam.

Where it gets interesting is that Private Eye notes that the Financial Conduct Authority issued a scam warning against OneCoin in September 2016.

Shortly after Carter-Ruck sent its SLAPP attempt to McAdam, the FCA withdrew its warning.

Despite its warning being 100% accurate, and that OneCoin continued to be promoted to UK investors, mostly ethnic minorities.

Despite the FCA having statutory immunity in the UK, which means it cannot be sued for libel for issuing a scam warning against you, unless a court can be persuaded that it acted in bad faith or unlawfully. This is a virtually insurmountable bar, and it is beyond doubt that OneCoin was not going to manage it.

The FCA has refused to comment on whether the removal of the OneCoin scam warning followed any lobbying from OneCoin’s end.

Yet nonetheless, somehow and for some reason it was persuaded to remove an entirely factual scam warning.

Searches of the FCA register for “OneCoin” or “OneLife” produce no results to this day, other than unrelated regulated businesses unfortunate enough to have adopted the name “OneLife”.

When a scam as blatant as OneCoin can somehow persuade the FCA to withdraw an entirely factual warning, is it any wonder that we hit a brick wall when we try to persuade the FCA to protect unwitting consumers from more sophisticated and subtle Ponzi schemes?

Any novice DIY investor should start their research by standing in front of a mirror and repeating to themselves:

The authorities do not care if I get scammed.

The authorities do not care if I get scammed.

The authorities do not care if I get scammed.

Anyone who says “If this was a scam the authorities would have shut it down” is scamming me.

3 thoughts on “Did the FCA withdraw scam warning after legal threats?

  1. You are quite right. In my opinion, the authorities do not care if investors get scammed.

    In most cases, their view is the risk warnings are there and should be taken seriously, the promotion activity was conducted in a lawful way although the business did not succeed. If you were scammed that is a matter for the police to deal with, not us. Sorry about that.

    More definitely needs to be done by all the authorities. In my humble opinion, all promotions should be registered with the FCA and some sort of ‘bond’ or insurance needs to be taken out, even if the insurance policy is a D&O malfeasance policy, and paid for by the issuer covering the amount they wish to raise and the interest payable for the expected life of the issue.

    That may not be practical but something needs to be done.

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