The cofounder and main promoter of the $4 billion OneCoin pyramid scheme was sentenced to 20 years in prison for his role in one of the first and biggest criminal frauds involving cryptocurrency.
Karl Sebastian Greenwood, 46, was sentenced in New York on Tuesday, after pleading guilty in December to producing and promoting a phony cryptocurrency. Greenwood was the wingman of Ruja Ignatova, the so-called Cryptoqueen and most wanted crypto fugitive in the world.
U.S. District Judge Edgardo Ramos called the fraud "massive in many respects," noting that OneCoin had no blockchain, no real cryptocoin and no trading market. Victims could not withdraw their investments and most were faced with the likelihood that they'll never get any of their money back.
"At base, it involved nothing more than old-fashioned snake oil," the judge said.
Greenwoood's sentencing closes one chapter of the OneCoin case, which authorities describe as one of the largest pyramid schemes in history. It harmed 3.5 million victims around the globe and foreshadowed a broader crackdown on crime in the cryptocurrency markets.
OneCoin generated $4.3 billion in revenue and $2.93 billion in profits between 2014 to 2016, but had no real value, according to prosecutors. It operated as a multilevel marketing network that paid commissions to millions of people worldwide for recruiting others to buy OneCoin packages.
Greenwood and Ignatova promoted the phony cryptocurrency in splashy appearances around the globe in which they assured victims that OneCoin would be the next Bitcoin.
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The government said Greenwood made $300 million himself from the fraud, some of which he spent on properties in Spain, Dubai and Thailand, luxury travel on a private OneCoin jet, designer clothes and a down payment on a Sunseeker yacht. Ramos ordered him to forfeit $300 million.
In the hearing, Greenwood read from a prepared statement, telling the judge he regretted the harm he'd caused.
"The pain I caused others — the victims — I cannot take it back," he said. "I'm deeply sorry."
"I destroyed my life and caused irreparable harm to many others," he said.
Ignatova, the mastermind behind OneCoin, disappeared in 2017 as OneCoin came under suspicion and is still missing. She is faced with a 2019 U.S. indictment charging her with fraud and money laundering. She's on the FBI's Ten Most Wanted list. Authorities are offering a $100,000 reward for information leading to her arrest.
Greenwood was arrested at his home on Koh Samui, Thailand, in 2018 and extradited to the U.S. He is faced with as many as 60 years in prison. He admitted to hyping OneCoin as a competitor to Bitcoin despite knowing it was a fraudulent currency whose value was arbitrarily set by its backers, not the market, and was used to lure victims into a multi-level marketing scam.
Greenwood, a Swedish citizen and father of four children, appealed to the judge for leniency, claiming he has accepted responsibility for his crimes. Greenwood said he suffered "extraordinarily harsh conditions" behind bars in Thailand and the U.S. since his arrest.
Details of his imprisonment appear to have been blacked out by his lawyers in a court filing. He is a former employee of KPMG in Germany and worked for his parents' advertising agency in Sweden.
Prosecutors said most OneCoin victims are unlikely to get any of their money back, in contrast to investors in Bernard Madoff's record $20 billion Ponzi scheme, most of which has been recovered for victims.
Ramos referred to Madoff in explaining his sentence, contrasting the lack of financial means and sophistication of the OneCoin investors with many of Madoff's victims. The judge noted a 2016 email in which Greenwood referred to OneCoin investors as "idiots."
"The victims in this case would never have been targeted by Mr. Madoff," he said. "They were too small."
OneCoin used a network of money launderers who moved cash through banks in at least 21 countries, according to the U.S. Mark Scott, a former partner in the law firm Locke Lord, was convicted after a trial in 2019 of laundering $400 million in OneCoin proceeds. Prosecutors claimed Scott set up a phony investment fund to process money from Ignatova. He has not been sentenced.
Gilbert Armenta, a former boyfriend of Ignatova who pleaded guilty to laundering $300 million in OneCoin money, was sentenced to five years in February.
Greenwood's parents and other family members flew from Sweden to attend the sentencing. His father wiped away tears upon hearing his son's speech to the court, in which he expressed sadness for shaming the family. When the judge announced the 20-year sentence, Greenwood's mother buried her face in her hands.
