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Financial expert disputes OneCoin claims

Financial expert and consumer protection advocate, Robert Bell, says OneCoin’s response to Samoa Observer’s coverage on the company’s presence in Samoa is a “clear confession of attempts to skirt the law." 

Speaking to the Samoa Observer, he believes that despite their attempts to defend themselves against being labelled a “Hybrid Ponzi-Pyramid Scheme" by the Central Bank of Samoa, OneCoin is implicating itself by admitting it seeks to contract their consumers out of the umbrella of consumer protection laws by labelling them as self-employed contractors, albeit without appropriate qualifications or limitations.

“In my opinion, it’s not at all a pathway to a defence,” said Mr. Bell, who is also Chair of Advanced Pacific Financial Inclusion Infrastructure, which is an industry body which focuses on efficient delivery of financial inclusion services in the Pacific.

“Consumer protection legislation outgrew relatively unsophisticated evasions such as this, maybe 100 years ago, by qualifying what a consumer is and is not.

“The claim that because a consumer is also a small business owner — which may exempt the fraudster from disclosure obligations and an appropriate duty of care — is reminiscent of very old American legislation regarding payment systems, and some goods and services guarantees,” he explained.

But internationally, consumer anti-fraud protections include almost all small business owners in their definitions of consumer, so that this cannot be done to skirt consumer protection law.

Last month, the Central Bank of Samoa issued a press statement based on a “spontaneous intelligence report from the New Zealand Financial Intelligence Unit regarding the OneCoin operations”.

The report labelled OneCoin as a “Hybrid Ponzi-Pyramid Scheme” because the “scam” contains ingredients of both types: Ponzi Scheme and Pyramid Scheme.

But OneCoin disputed the claim this month, claiming in a letter to the Samoa Observer that “neither OneCoin nor OneLife companies have organization, representation or employees in Samoa and New Zealand.

“No one has authority to act or make statements on company’s behalf in Samoa and New Zealand,” they said.

But Mr. Bell said OneCoin is operating as a financial service provider, and so are its contractors because it involves the transfer of value, a payment system, and managing payments on behalf of others.

By contracting independent agents or otherwise, OneCoin is committing an offence under money laundering legislation in any country it operates, if either it or its agents, are not permitted to offer that service – depending on the territory.

Not only that, he said OneCoin’s consumers are entitled to consumer protection laws even if classified as self-employed or rather as Independent Marketing Associates (I.M.A). As Independent Marketing Associates, they are even being trained in Know-Your-Customer (K.Y.C) and Anti-Money Laundering (A.M.L) laws, according to OneCoin. It simply doesn’t stack up to scrutiny, Mr Bell said.

“The users which are part of the OneLife Network are not consumers,” the OneCoin letter states. “They are I.M.As, meaning they are self-employed business owners.”

But Mr. Bell, siding with New Zealand Police, challenged this and said: “On what grounds have you assessed each I.M.A as a qualified investor? You can't circumvent consumer protection laws by dressing people up as self-employed."

“Legitimate financial institutions expend considerable resources to ensure that unauthorized agents — are not re-selling financial products without appropriate training or limitations — and that those who are have the resources, knowledge, expertise and training to do so legally and ethically.”

“In the case of OneCoin, it appears that they encourage, reward, and recruit I.M.A’s to do the jobs that would qualify as financial services. And when the going gets tough, they simply wash their hands, and leave these people out in the cold, alone, and possibly facing criminal charges, after luring them in with promise and possibility.”

OneCoin states that it is not a Ponzi scheme because it is a centralized, closed source cryptocurrency. 

“The closed system has strict A.M.L and C.F.T. (Anti-Money Laundering and Combating the Financing of Terrorism) policies as well as K.Y.C. (Know-Your-Customer) implementation and, as in our case, prevents anonymous transactions.

“Based on that it is much more compliant than decentralized ones,” they write.

I.M.A’s are not obligated to spend money or recruit more I.M.A’s, which OneCoin said also differentiates it from Ponzi schemes.

“But a Ponzi scheme is not defined by the existence of K.Y.C, or not,” Mr Bell continued.

“A Ponzi scheme is a system of promises made by promoters of an investment service, where a charade of legitimacy is upheld for a period of time, by imitating investment returns on capital, by paying out capital of existing any new investors, to imitate investment returns on previous investments, while usually defrauding and deceiving both new and earlier investors on the existence or decay in capital stock available to generate future returns or repayment.”

A Ponzi scheme is a business scam based on fake investments, often in product sales, where investors encourage more and more people to invest with the promise of greater profits for everyone. But the profit only comes from more investment and not the product sales, leading to disappointment for new investors.

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