Technology
Beware: OneCoin luring Indians by selling tokens for cryptocurrency
Just last week, Sanjay Saxena, the Joint Commissioner of Police at Mumbai told a packed audience at a Moneylife Foundation seminar that if you have lost money to a get-rich-quick scheme, then the only thing to blame is your greed as basic human nature and weaknesses does not change. Despite the fiasco of BitCoin and several other cryptocurrencies, one more virtual cryptocoin OneCoin is being aggressively marketed in India under the pretext of selling educational material and ‘once in a lifetime opportunity’.
 
According to information received from sources, several intelligent and influential people involved in this 'business' are approaching others under the pretext of offering 'future of payments'. Authorities from many countries like Bulgaria, Finland, Sweden, Norway and Latvia have warned citizens of potential risks involved in business like OneCoin.
 
OneCoin is marketed as a virtual cryptocoin, based on cryptocurrencies, but without an actual public and transparent blockchain. This is promoted by OneCoin Ltd, an offshore Gibraltar company led by Bulgarian Ruja Ignatova. As usual with several multilevel marketing (MLM) and money circulation operators, OneCoin also says it does not sell any cryptocoin but education material for trading. Members buy educational packages ranging from 100 euros to 25,000 euros and each package includes tokens, which can be assigned to "mine" OneCoins. 
 
According to Wikipedia, OneCoin is said to be mined by servers at two sites in Bulgaria and one site in Hong Kong. In a typical OneCoin recruiting meeting most of the time recruiters talk about investing in cryptocurrency and the educational material is barely even mentioned.
 
Talking about the hype and commotion around OneCoin, a report from UK-based Mirror says, "The audience was tempted with a Special Combo Package. You get 506,000 tokens, and six splits turn them into 32 million tokens. The cost was roughly £28,000 and those splits would turn that into £1.2million. And that’s also even if OneCoin doesn’t increase in value – that financial miracle again."
 
"OneCoin members even have a little sign they make to each other, holding their thumb and forefinger to make a circle. Maybe it’s meant to symbolise a coin. It certainly added to the feeling that this was more of a cult than a sound financial institution. To me the sign looked like the number zero – which happens to be the amount I would invest," the report by Andrew Penman says.
 
Earlier in July, Financial Services and Markets Authority (FSMA) from Bulgaria issued a warning about OneCoin stating that OneCoin has not received any form of recognition whatsoever from the Authority. "The same is true of the persons who are promoting OneCoin. They do not hold any authorisation or any other form of recognition from the FSMA," the Bulgarian Authority added.
 
In an article, Insidebitcoins.com says OneCoin is raising a lot of questions and providing next to no answers. "And the answers we can deduct point to OneCoin being a major MLM scheme are an attempt to lure in people with the words 'cryptocurrency' and 'Bitcoin'. All the while having nothing to do with either, by the looks of it. Use this website at your own risk," it concludes.

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COMMENTS

Muhammad Tauseef Ashiq

8 months ago

Being Invester of one coin, I have not noticed any fraudulent behaviour, the founder of one coin Dr.Ruja is herself devoted to more success this cryptocurrency. Few rumours are expected to prove this un_legitimate crypto currency. people's did Rumours same it is about Bitcoin coin.

REPLY

Sanj

In Reply to Muhammad Tauseef Ashiq 8 months ago

You sound like you have a vested interest. Usually when one is being cheated one doesn't expect the cheater to put a board on his or her forehead that he/she is a cheater!

Tim Tayshun

8 months ago

https://news.bitcoin.com/beware-definitive-onecoin-ponzi/#comments

Please read my very in depth, heavily researched and well referenced investigative report on the OneCoin scam and the history of its scammer founders and co-conspirators.

Not cited in that report is the fact that Onecoin CEO, Ruja Ignatova was convicted of fraud for embezzling money from her own employees and suppliers, as well as fraudulent accounting practices aimed at fraudulently bankrupting the company. She plead guilty to 24 counts of fraud this March in German court and was issued a suspended sentenced of 14 months probation and ordered to pay restitution for her theft to the Waltenhofen Gusswerks victims and suppliers she employed.

Cancel all Section 66A matters: MP Rajeev Chandrasekhar urges the PM
Rajeev Chandrasekhar, the independent Member of Parliament (MP), through a letter has urged Prime Minister Narendra Modi to immediately cancel all matters pertaining to Section 66A of the Information Technology Act and inform all police forces and courts across the country about the March 2015 judgement of the Supreme Court. 
 
Mr Chandrasekhar, who was amongst the petitioners that moved Court on the issue in 2013, noted that arrests under Section 66A increased despite the apex court's verdict in March last year. He sent a letter to the PM highlighting points to a disconnect between the verdict of the apex court, police and lower courts.
 
Last year in March, the Supreme Court struck down the 'draconian' Section 66A of the IT Act, guaranteeing citizens fundamental right to freedom of speech and expression. Section 66A of the IT Act has been repeatedly abused by powerful politicians, political parties and their followers to silence critics and violate human rights through abuse of the draconian power to arrest and jail those who speak their minds, especially on social media.  
 
Mr Chandrasekhar stated that this battle to uphold citizens' freedom of expression on the internet was a "long and arduous fight" and that the near doubling of charge sheets under the section in 2015. He also noted that 575 people currently "languish in jail" after arrests that are "illegal and void". 
 
The examples of misuse of Section 66A by politicians are many. In 2012, two young girls were arrested and terrorised by a mob for a harmless Facebook post criticising the shutdown of Mumbai for the funeral of Shiv Sena supremo Balasaheb Thackeray. One of them had merely ‘liked’ the post.
 
The two girls were first booked under Indian Penal Code (IPC) sections 295A (hurting religious sentiments). When it was realised the Shiv Sena is not a religious group the girls section 295A was dropped and section 505(2) (promoting enmity or ill-will between classes) and section 66A were applied.
 
Karti Chidambaram, son of former Union minister P Chidambaram, had a Puducherry businessman arrested at night for some posts on Twitter. This case, too, had sparked outrage on social media. Section 66A has even been applied with other provisions of the Indian Penal Code for cases involving cyber-squatting and impersonation.
 
Calling attention to how these arrests were contrary to the Digital India vision, MP Chandrasekhar observed, "these illegal arrests are sending a completely contrary message to India's citizens. If we are indeed serious about transforming India into a "Digitally Empowered Society and Knowledge Economy", then our institutions and policies must back this intent by aligning to this goal. The current data, however, points to a disconnect between the verdict of the apex court, the police and the lower courts, and may give citizens the impression that this government too, like the United Progressive Alliance (UPA), is keen on playing big brother." 
 

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All you needed to know about account aggregators
The Reserve Bank of India (RBI) on 2 September 2016 notified the Non-Banking Financial Company - Account Aggregator (Reserve Bank) Directions, 2016 (Directions) which is in furtherance to the draft guidelines (Draft Guidelines). Before that RBI issued press release on 3 March 2016 and 2 July 2015 where the central bank had expressed its intent to set up new kind of non-banking financial company (NBFC), which would carry out the business of accounts aggregator (AA). The concept of account aggregation however was a brain child of the Financial Stability and Development Council, and the same has been doing its rounds from 2014 in the 10th meeting of FSDC Secretariat and the matter was confirmed only in the 12th meeting of FSDC in 2015.
 
With the NBFC-AA Directions in place, RBI has taken a step forward in regulating such type of companies. We appreciate the fact the central bank has taken an initiative to regulate these companies. However, we still feel that it is not appropriate at the RBI's end to call it as an NBFC; reason being the scope of the AAs does not allow them to carry any financial activity whereas the term NBFC signifies a company, which is not a bank but carries out financing activities. 
 
What is an Account Aggregator?
 
As per the Directions, AA has been defined to mean an NBFC which will undertake the business of an account aggregator for a fee or otherwise. 
 
Further, the business of account aggregator has been defined in the Directions as follows: 
 
3. (1) 
 
XXX
 
(iv) “business of an account aggregator” means the business of providing under a contract, the service of, retrieving or collecting such financial information pertaining to its customer, as may be specified by the Bank from time to time; and consolidating, organizing and presenting such information to the customer or any other financial information user as may be specified by the Bank;
 
Provided that, the financial information pertaining to the customer shall not be the property of the Account Aggregator, and not be used in any other manner.
 
Financial Information has been further defined in the Directions as follows: 
 
3. (1) 
 
XXX
 
(ix) “Financial Information” means information in respect of the following with financial information providers:
a. bank deposits including fixed deposit accounts, savings deposit accounts, recurring deposit accounts and current deposit accounts,
b. Deposits with NBFCs
c. Structured Investment Product (SIP)
d. Commercial Paper (CP)
e. Certificates of Deposit (CD)
f. Government Securities (Tradable)
g. Equity Shares
h. Bonds
i. Debentures
j. Mutual Fund Units
k. Exchange Traded Funds
l. Indian Depository Receipts
m. CIS (Collective Investment Schemes) units
n. Alternate Investment Funds (AIF) units
o. Insurance Policies
p. Balances under the National Pension System (NPS)
q. Units of Infrastructure Investment Trusts
r. Units of Real Estate Investment Trusts
s. Any other information as may be specified by the Bank for the purposes of these directions, from time to time;
 
This means that an NBFC doing business of AA will only be allowed to collect and provide financial information in relation to any customer either to the bank or any other financial user. AAs shall not be undertaking any financial activities or say any fund based activities as such which is a basic test of eligibility to be termed as an NBFC as per section 45I of RBI Act, 1934. Conclusively, AAs will simply be agents holding information on financial assets of customers and will disseminate such information only under contractual obligation or under express consent of the customers whose information they hold. They cannot use the information for any other purpose. This ultimately brings us to the moot question – whether the new class of NBFC floated by RBI is actually an NBFC or not? Prima facie looking at the scope of operations and activities that shall be carried out by AAs makes it apparent that they will not be undertaking any financial activities and hence, are not to be considered by NBFCs by nature; except the fact that it has RBI certified label of being called as NBFC.  
 
Duties & Responsibilities of AAs 
 
With the limited scope of operations, the main responsibility of the AAs is to procure and disseminate financial information of any customer under explicit consent and to keep it safe so as to not let it pass from one hand to another freely. The Directions lay down the duties and responsibilities of the AAs for:
 
  • obtaining consent of customer;
  • obtaining authorisations for providing the services;
  • method of proper identification of customers;
  • laying down Citizen’s Charter for protection of rights of customers; and
  • safeguarding financial information of customers and ensuring no retrieval and no transfer of such information happened without explicit consent of customer 
 
Registration of NBFC-AA
 
The registration process of this new kind of NBFC has been aligned with the recently notified relaxed norms of NBFC registration and the same will be allowed to be registered through the fast track process as the NBFC-AA, given its limited scope of operations and functions, shall not be holding any public funds and will neither have any customer interface. 
 
  • The basic requirements demarcated in the Directions for registering an NBFC-AA are as follows:
  • It should be a company registered under section 3 of the Companies Act, 1956 or a company registered under sub section (20) of section 2 of the Companies Act, 2013;
  • Mandatorily required to obtain Certificate of Registration (CoR) from RBI for doing business of account aggregator under section 45-IA of the RBI Act, 1934;
  • The minimum net owned funds of the company to be Rs. 2 crores or more;
  • Equipped with necessary resources and wherewithal to offer such services to customers such as information technology system;
  • Promoters are fit and proper;
  • Management character not to be prejudicial to the interest of the public;
  • Leverage ratio of the company should not be more than 7 times.
 
Quick Registration FAQs:
 
Do I need registration if I am regulated by other financial sector regulator?
No, entities being regulated by other financial sector regulators and aggregating only those accounts relating to the financial information pertaining to customers of that particular sector will be excluded from the above registration requirement.
 
I am already doing business of account aggregator. Do I also need registration?
Yes, all entities carrying business of AA shall apply for registration within one month from the date of these Directions (i.e. before October 01, 2016).
 
I am doing business of AA and have already made application for registration. Should I put my operations on hold until CoR is granted?
No, companies which have applied for registration as an NBFC-AA, shall be permitted to continue the business of an AA till their application for issue of CoR is rejected or twelve months from date of the application, whichever is earlier.
 
I am doing business of AA but don’t comply with NOF requirement. Should I increase NOF upto 2 crores before making application for registration?
No, those companies not having a NOF of minimum of Rs. 2 crore at the time of seeking registration, shall meet the NOF criteria within the period of validity of the in-principle approval for grant of CoR given by RBI.
 
What is the period of validity of the in-principle approval for grant of CoR?
Twelve (12) months from the date of granting such in-principle approval.
 
What is to be done by the company during period of validity of in-principle approval?
Within the period of validity of in-principle approval, the company shall put in place the technology platform, enter into all other legal documentations required to be ready for operations and report position of compliance with the terms of grant of in-principle approval to the RBI.
 
  • CoR once granted; can be cancelled?
  • Yes, RBI may at the occurrence of the following events cancel the CoR of the NBFC-AA if it:
  • ceases to carry on the business of an Account Aggregator in India; or
  • has failed to comply with any condition subject to which the certificate of registration has been issued to it; or
  • it comes to the notice of the Bank that the Account Aggregator is no longer eligible to hold the certificate of registration; or
  • at any time fails to fulfill any of the conditions required for registration
  • fails to -

 

  • comply with any direction issued by RBI; or
  • maintain accounts, publish and disclose its financial position in accordance with the requirements of any law or any direction or order issued by RBI; or
  • submit or offer for inspection its books of account or other relevant documents when so demanded by the Bank.
 
Does RBI defines the fit and proper criteria for promoters/directors?
 
Yes, clause 12.5 of the Directions specifies the criteria for promoter and directors to ensure that they are fit and proper to assume such roles. For this purpose, an AA shall:
i. have a policy for ascertaining the fit and proper criteria of the directors/ managing director/ CEO at the time of appointment, and on a continuing basis. The policy on the fit and proper criteria shall be on the lines of the Guidelines contained in Annexure 4 of these Directions;
ii. obtain a declaration and undertaking in format given in Annexure 5 of these Directions from the directors/ managing director/ CEO giving additional information on the directors/ managing director/ CEO.
iii. obtain a Deed of Covenant signed by the directors/ managing director/ CEO, which shall be in the format as given in Annexure 6 of the Directions;
iv. furnish to the RBI an annual statement on change of directors/ managing director/ CEO duly certified by the Statutory Auditors that fit and proper criteria in selection of the directors has been followed within 15 days from the closure of year.
Data Security
 
Since the AAs will be bestowed with a lot of financial information of various customers, it becomes very essential to have proper IT infrastructure in place to provide for adequate security of such data. The AAs shall adopt sound IT framework which is commensurate with the amount of financial information being held by them. They will be responsible for the safe storage as well as safe transfer of data from financial information providers to their own systems and from their systems to the financial information users. It will be the duty of AAs to ensure safety of data when at the same time they need to ensure that their systems do not retrieve or store any customer credentials.  The Directions specify the following for safety of data:
  • protection from unauthorised access, alteration, destruction, disclosure, or dissemination of records and date
  • scope to upscale the technology with respect to any financial information or financial information provider
  • appropriate measures for Disaster Risk Management and business continuity
  • timely Information System Audit by CISA certified external auditor
 
Other Provisions for NBFC-AAs
 
Apart from the specific provisions as made applicable to NBFC-AA in these Directions, the normal provisions as applicable to NBFCs at large have also found a place in the same Directions so that one may not need to look beyond these Directions for the provisions applicable to this class of NBFCs. The following are the other provisions which have been incorporated in the Directions:
 
a) Customer Grievance Policy for handling/disposing of customer complaints within a specified time period not exceeding later than 1 month.
 
b) Pricing of services of AAs shall also be done by a policy and shall be in conformity with internal guidelines in this regard of the AAs.
 
c) Corporate Governance - AAs shall have adequate internal mechanisms for reviewing, monitoring and evaluating its controls, systems, procedures and safeguards for which it shall have the following committees: 
  • Audit Committee – in line with section 177 of Companies Act, 2013
  • Nomination Committee – in line with section 178 of Companies Act, 2013
  • Risk Management Committee – for designing a framework for risk management and strengthening system security to protect access to customer data, etc.
d) Provisions with respect to change/ acquisition of control over the management of the companies.
 
e) Returns shall be filed in by AAs as may be specified by RBI from time to time.
 
f) Inspection may be carried out by RBI or any of its authorised officers at such intervals as it may deem fit.
 
g) Exemption from provisions of these Directions may be granted by RBI to any company or class of companies subject to such conditions as it may impose. 
 
 
(Dheeraj Kumar Sharma works as Manager in the Financial Services Division at Vinod Kothari & Company) 

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COMMENTS

B S Bhupal

8 months ago

A detailed article on new type of NBFC AA. Really useful.Thanks

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