OneCoin an “illegal MLM” in Colombia

Colombia's financial regulator just dealt OneCoin a serious blow, officially declaring the cryptocurrency scheme an illegal multilevel marketing operation with no legal standing in the country.

The Superintendency of Societies, Colombia's government watchdog for corporate operations, issued the warning under a new law that took effect January 24, 2016. The rule is simple: any MLM company operating in Colombia must establish a physical branch there. OneCoin has none.

Francisco Reyes Villamizar, Colombia's Superintendent of Companies, made the legal basis crystal clear. OneCoin cannot operate as a network marketing company in Colombia, cannot act as a commercial representative for foreign MLM firms, and its Colombian affiliates do not constitute a legitimate branch operation. The company is barred from operating under those pretenses entirely.

The regulator went further, tearing apart OneCoin's compensation structure. For any MLM to be legitimate, commissions paid to independent affiliates must be tied proportionally to actual retail sales. OneCoin fails this test spectacularly. The company pays commissions based on recruitment, not product sales—the hallmark of a Ponzi scheme.

BehindMLM reached the same conclusion back in late 2014, examining OneCoin's business model and finding virtually no retail activity. The math was simple: it was a Ponzi scheme masquerading as a cryptocurrency.

Colombia's regulators also rejected OneCoin's claims of being legal currency. The Bank of the Republic made clear that only the Colombian peso qualifies as legal tender in the country. OneCoin has no such status. It carries no recognition from Colombia's central bank, no backing from any central bank globally, and fails to meet the International Monetary Fund's definition of currency.

In practice, this distinction hardly matters. OneCoin's blockchain-based Ponzi points cannot function as currency anyway. Affiliates cannot spend them. They can only invest more money to buy OneCoin or cash out a tiny percentage each week—a percentage that OneCoin controls and frequently denies.

The company has a documented history of blocking withdrawal requests. Angry affiliates flood Facebook with complaints about frozen accounts and missing funds. OneCoin staff then delete these posts, scrubbing evidence of the problems from the platform.

OneCoin and its promoters once boasted of recruiting 500,000 merchants willing to accept the coin as payment. That was contingent on the company generating 30% of its total OneCoin supply. Neither happened. The merchants never materialized. The cryptocurrency remained what it always was: a tool for extracting money from recruits, not a functioning currency or legitimate investment.

Colombia's formal declaration closes one avenue for the scheme. But OneCoin's operators have already shifted tactics, moving money and operations across borders to escape regulatory scrutiny in multiple countries.

🤖 Quick Answer

What legal action did Colombia's financial regulator take against OneCoin?

Why did OneCoin fail to comply with Colombian regulations?
OneCoin failed to meet the requirements of a law effective January 24, 2016, which mandated that all MLM companies operating in Colombia must establish a physical branch. OneCoin had no physical presence in the country.

What restrictions did Francisco Reyes Villamizar impose on OneCoin's operations?
Colombia's Superintendent of Companies prohibited OneCoin from operating as a network marketing company, acting as a commercial representative for foreign MLM firms, and prevented Colombian affiliates from constituting a legitimate branch operation.

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