Failure to Prosecute
Only days ago, Valerie Caproni, the District Judge presiding over an ongoing suit involving purported Ponzi scheme, OneCoin, issued a stern warning directed at the plaintiffs.
Dated April 10th, 2020, this document indicates that, dating back to August 23rd, 2019, plaintiffs in the case were ordered to begin submitting monthly updates on ‘the status of service of process’.
Unfortunately, and for unknown reasons, these monthly updates have been absent for, both, the months of March, and April. As a result, District Judge Valerie Caproni was forced to take a strong stance. The following is an excerpt from the document, elaborating on this stance.
“IT IS HEREBY ORDERED that Lead Plaintiff must show cause no later than April 16, 2020, why this case should not be dismissed with prejudice for failure to prosecute under Fed. R. Civ. P. 41(b).”
She continues, “Lead Plaintiff is sternly warned that failing to comply with the Court’s orders going forward could result in sanctions.”
Time will tell if this hiccup will, indeed, derail the proceedings. With a deadline fast approaching, mere days away, light will soon be shed on the direction of the case.
A Ponzi scheme is an illegal practice in much of the world; Gaining its name from Charles Ponzi, an individual that committed the first scheme of its kind in 1919.
Similar to a pyramid scheme, a Ponzi scheme relies upon a continued inflow of new investors. In the latter, investors are typically promised exorbitant returns by a company offering a service – typically as a fund manager, where the company is supposed to invest funds on behalf of participants.
Unfortunately, in this scheme, the company does not actually invest any of the received funds. Rather, they simply pool the received money. For those lucky enough to withdraw their money early, the company will generate their ‘returns’ by drawing upon the pooled reserve of investments. As a result, the impression is given that a genuine return was generated.
What this means, is that when enough people attempt to withdraw their money, there will come a point in time when there is simply not enough left in the pooled reserve to cover what is owed.
For the entire process to continue working, there needs to be a continued surplus of inflow vs. outflow. Simply put, eventually the vast majority of participants in such a scheme will lose their money. Those facilitating the scheme will take their share, while those cashing out early are simply taking money from others in the same situation.
While there is some debate as to whether OneCoin better fits the definition of a pyramid vs ponzi scheme, one thing is clear – investors were defrauded of roughly $4 Billion.
Depending on the outcome of these court proceedings, OneCoin might go down as one of the largest Ponzi Schemes of all time. If this happens, Dr. Ruja Ignatova – the main orchestrater behind OneCoin – will find her name alongside others, such as the infamous Bernard Madoff.
Beyond, simply, the scope of the scam, the situation surrounding OneCoin has captivated the imagination of many, due to the 2017 disappearance of Dr. Ruja Ignatova.
In Other News
We recently reported on an FCA enforced lockdown of ePayment – a UK based payment processer. While there has been no resolution to this event, to date, there have been various theories as to the reasoning for the lockdown – one of which is a tie to OneCoin. We took a brief look at these speculative causes, and whether there is any veracity to the claims, or if they are simply conjecture.