An Examination of Legal Professionals’ Involvement in the OneCoin Scam and the Lessons for Legal Due Diligence
In a startling revelation of legal malpractice in the crypto industry, the OneCoin fraud case has brought to light the critical involvement of lawyers in facilitating large-scale financial scams. Recently, a German court sentenced Martin Breidenbach, an attorney implicated in the OneCoin scheme, as a money launderer. In the U.S., Mark S. Scott, a former lawyer at the reputable firm Locke Lord LLP, was also convicted of laundering $400 million from OneCoin proceeds. OneCoin should undoubtedly be a lesson for lawyers.
The Role of Lawyers in OneCoin:
The recent convictions in the OneCoin fraud case, particularly those of legal professionals, shed light on a critical aspect often overlooked in large-scale financial scams: the role of lawyers. The German court’s sentencing of OneCoin promoter Frank Ricketts, Manon Hubenthal, and their attorney Martin Breidenbach for their involvement in the OneCoin Ponzi scheme highlights a concerning trend where legal expertise is misused to facilitate fraudulent activities.
Breidenbach was sentenced to two years and nine months in prison for his role in laundering funds for OneCoin and its founder, the “Cryptoqueen” Ruja Ignatova. Breidenbach’s involvement included transferring substantial sums of money stolen from OneCoin members for property purchases, a clear misuse of his legal expertise for illicit activities.
This instance is not isolated. In the United States, Mark S. Scott, a former lawyer at the reputable firm Locke Lord LLP, was also convicted for his role in the OneCoin scam. Scott was found guilty of laundering $400 million from OneCoin proceeds, utilizing his legal acumen to establish fake investment funds.
He was paid more than $50 million for his money laundering services, which he used to buy luxury cars, a yacht, and several seaside homes. Scott’s conviction underscores a disturbing trend where legal professionals exploit their knowledge and positions to aid and abet fraudulent schemes.
Read our reports about OneCoin lawyer Mark S. Scott here.
These OneCoin cases highlight a significant ethical breach within the legal profession, emphasizing the importance of strict adherence to legal due diligence and ethical standards. The involvement of lawyers in such schemes not only undermines the integrity of the legal profession but also facilitates the perpetration of financial crimes on a global scale. The convictions of Breidenbach and Scott serve as a sobering reminder of the responsibilities that come with legal expertise and the dire consequences of its misuse.
The involvement of legal professionals in OneCoin extended beyond mere advisory roles. They were instrumental in creating and maintaining the financial infrastructure that allowed the scheme to flourish. Their actions included setting up offshore accounts, facilitating large-scale financial transactions, and providing a veneer of legitimacy to the operations.
The Legal Facilitation in OneCoin Fraud
In the OneCoin case, lawyers played pivotal roles in constructing legal frameworks and laundering money, thus enabling the scam to flourish. Breidenbach and Scott are examples of how legal professionals can become instrumental in legitimizing and perpetuating fraud. They laundered hundreds of millions of dollars or euros for their fraudulent clients.
The lawyers apparently did not even check (or did not want to know) whether OneCoin had the regulatory permission to sell these financial products. The German court also established this in its ruling.
This pattern of legal complicity is not confined to the OneCoin case. Mark S. Scott used his legal knowledge to set up fake investment funds. His role exemplifies how legal professionals can facilitate the movement and laundering of illicit funds, earning substantial fees in the process.
The Obligation for Legal Due Diligence
These cases underscore the critical responsibility of lawyers to conduct thorough Know Your Customer (KYC) checks. Legal professionals are obligated to ensure that their services are not misused for illegal activities. In the context of financial transactions, especially in the burgeoning field of cryptocurrencies, this obligation becomes even more significant. Lawyers must be vigilant in identifying the signs of fraudulent schemes and ensuring that their practices do not aid in the perpetration of such scams.
Consequences of Legal Misconduct
The consequences of such legal misconduct are severe, not only for the lawyers involved but also for the integrity of the legal profession. The convictions of lawyers in the OneCoin case serve as a stark reminder of the legal profession’s duty to uphold ethical standards and the law.
The Lesson For Lawyers
The OneCoin case, with its web of legal facilitation, laundering, and global deception, demonstrates the essential role that legal professionals can play in both the perpetration and prevention of financial fraud. It is a call to action for the legal community to reinforce ethical practices and due diligence, ensuring that their expertise is used to uphold justice, not to subvert it. As the aftermath of OneCoin continues to unfold, it serves as a cautionary tale for lawyers worldwide, emphasizing the importance of ethical responsibility in legal practice.
A good start would be for lawyers to check whether their clients even have regulatory permission to operate their business or whether they need regulatory permission to do so. There are now enough court rulings and regulatory guidelines to prove that crypto MLM schemes typically also require such permission.
Another lesson for financial scheme lawyers is not to make themselves available for SLAPP campaigns to prevent criticism and warnings against their (illegally) acting clients. By doing so, lawyers become complicit with their clients.
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