{"id":12757,"date":"2023-12-18T00:44:00","date_gmt":"2023-12-18T00:44:00","guid":{"rendered":"https:\/\/www.taxpolicy.org.uk\/?p=12757"},"modified":"2023-12-27T13:06:51","modified_gmt":"2023-12-27T13:06:51","slug":"carter-ruck","status":"publish","type":"post","link":"https:\/\/heacham.neidles.com\/2023\/12\/18\/carter-ruck\/","title":{"rendered":"Carter-Ruck: how the UK’s best known libel firm recklessly acted for a $4bn fraudster"},"content":{"rendered":"\n

In 2016 and 2017, libel firm Carter-Ruck acted for a business called OneCoin, and threatened defamation proceedings against people who alleged OneCoin was a Ponzi scheme and a fraud. In fact OneCoin was<\/em> a giant Ponzi fraud – second only to Madoff. Plenty of people realised this at the time. Why did Carter-Ruck agree to act for them?<\/strong><\/p>\n\n\n\n

We’ve investigated the history in detail. It presents a picture of a firm recklessly acting for a client it should have known was a fraud, and recklessly making accusations it should have known were false. It’s likely that Carter-Ruck’s actions caused more people to lose more money to the fraud – and this was foreseeable at the time.<\/p>\n\n\n

OneCoin<\/h2>\n\n\n

OneCoin was founded in 2014. It presented<\/a> itself<\/a> as a cryptocurrency, akin to BitCoin, which was “mined<\/a>” by computers, held on a blockchain<\/a>, and traded on an exchange. OneChain was aggressively marketed online and offline<\/a>.<\/p>\n\n\n\n

Everything was a lie – OneCoin was one of the biggest scams in history<\/a>. There was no “mining”<\/a>. There was no blockchain<\/a>. The “exchange” presented fake prices<\/a>, designed to make investors think the price of OneCoin was rising when, in reality, there was no price at all. OneCoin was a fraud from the start<\/a> – a Ponzi scheme, where new investors’ money was used to pay old investors. It also had pyramid scheme features – existing investors were incentivised to sell packages to new investors, who’d pay up to \u20ac118,000<\/a> for worthless “training courses” accompanied by “tokens” that could be exchanged for OneCoins1<\/a><\/sup>The “training courses” being an attempt to evade prohibitions on pyramid schemes that don’t actually sell products, and securities regulations that in many countries would prohibit direct sales of OneCoin<\/span><\/p>\n\n\n\n

OneCoin failed spectacularly in 2017, and its executives are all now either in jail or in hiding. Around $4bn was stolen from millions of investors<\/a>, across 125 countries. Its founder, Ruja Ignatova, is one of the FBI’s ten most wanted fugitives<\/a>.2<\/a><\/sup>A side note: Ms Ignatova claimed to have studied European law at Oxford University. A poor quality scan<\/a> of a degree certificate is available, which purports to show her having studied at St Hilda\u2019s, and received a Magister Juris. There’s an open question if her Oxford qualification is genuine; media reports generally report her degree uncritically, but sources from St Hilda’s are sceptical she was there. I’ve asked St Hilda’s if they can confirm, and I’ll update this if I hear back.<\/span> <\/p>\n\n\n

Carter-Ruck and its decision to act for OneCoin<\/h2>\n\n\n

Carter-Ruck is possibly the UK’s most well-known libel-specialist law firm. At some point in 2016 it decided to act for OneCoin and Ruja Ignatova. How did it make that decision?<\/p>\n\n\n\n

I was a partner in a large law firm for many years. Before a partner could act for a new client, a team went through procedures to check the bona fides<\/em> of that client and their business. This included searches of the internet and other open source materials, as well as searches of private databases. Partly this was about protecting the firm’s reputation. But also it was about the serious consequences for a law firm which facilitated criminal activity or received money that was the proceeds of crime. I am not giving away any secrets by saying this, because these are procedures followed by all UK law firms.3<\/a><\/sup>The nature of many law firms’ work means they are also covered by anti-money laundering rules, which require more onerous procedures. I expect Carter-Ruck are not in scope<\/a> of the AML regulations, and therefore this article assumes they were only required to undertake more basic due diligence.<\/span><\/p>\n\n\n\n

What would reasonable due diligence have found in mid-2016, if we limit ourselves to material available on the public internet?<\/p>\n\n\n\n

First, OneCoin’s own publicly available promotional material should have alerted any reasonable person to the likelihood that this was a fraud: <\/strong><\/p>\n\n\n\n