Bitcoin pyramid schemes wreak havoc on Brazil’s ‘New Egypt’

Cabo Frio (AP), Brazil – In April, the Brazilian Federal Police attacked a helipad at a small beachfront hotel in Rio de Janeiro. Invoices.

The detainee told police he worked for GAS Consulting & Technology, a crypto investment firm founded by a former waiter-turned-bartender, said to be one of Brazil’s biggest rat lecturers, into a millionaire. rice field.

According to police, the 38-year-old company owned by Glaidson Acáciodos Santos will receive at least $7 billion (38 billion) between 2015 and mid-2021 as part of a Bitcoin-based Ponzi scheme that promises investors 10% monthly revenue. There was a real deal. ..

In hundreds of pages of documents obtained by the Associated Press, the federal police, police and prosecutors believed that Dos Santos and his associates were rich from the sudden valuation of bitcoin. He is accused of running a complicated racket that deceives small investors. He is currently in Rio Prison awaiting trial on charges of racketeering, financial crimes, attempted murder, and attempted murder of two business competitors. He is still under investigation for the attempted murder of a third competitor.

In an official statement, dos Santos has repeatedly claimed his innocence. His lawyer did not respond to an Associated Press request for comment.

Despite the long list of allegations he faces, dos Santos represents an unlikely hero to his ardent supporters. Many consider him a humble black man who made them rich by playing the financial system, whose unconventional Bitcoin work is believed to be outfitted by the wealthy white elite. ..

The case also underscores Brazil’s desire for a fast-growing digital currency. In Brazil, years of economic and political crises have made digital currencies an attractive shield against declining real and double inflation in Brazil.

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Bitcoin enthusiasm was particularly buoyed in Cabo Frio, the 230,000 resort town where GAS was based. As gas revenues increased and early adopters enriched, copycat companies grew rapidly and attempted to invest in the pandemic. The wave of crypto-related violence immediately continued.

Capo Frio has become known as “Heliopolis” amid many suspected rat lectures. As the best dog in town, dos Santos was dubbed the “Pharaoh of Bitcoin.”

According to the police, Dos Santos started trading in Bitcoin after leaving his job as a waiter in 2014. Once trained as an evangelical preacher, he recruited clients from the largest group in Brazil, the Universal Church of the Kingdom of God. According to police documents, a referral fee for attracting new employees and returning funds to GAS.

Jefferson Colombo, a crypto finance researcher at the Getulio Vargas Foundation in São Paulo, said religious groups are often the target of pyramid schemes. “Through communications we increase the base of the pyramid,” he said.

In a statement, the Universal Church was working with authorities, accusing dos Santos of “harassing and recruiting” priests and their flocks to join his company.

By 2017, dos Santos began making a fortune – and caught the attention of the authorities. The Federal Police reported that his company’s total transactions amounted to about 10 million Brazilian reals ($1.8 million) that year, 15 times the amount of money in and out of his bank account from across Brazil. The country’s Financial Intelligence Unit also noted that the company regularly trades cryptocurrencies on the online exchange platform (which was then registered as a restaurant).

According to the prosecutor, the alleged scheme went like this. Dos Santos instructed clients to deposit the money in cash into a bank account managed by a managing partner to avoid further scrutiny. The money is then sent to Dos Santos or his Venezuelan wife, Mireilles Jocelin Diaz Zerba, to put it in his pocket, buy bitcoin and other cryptocurrencies and traditional financial assets, and pay the money to other members of the scheme. I will do it.

The client was promised an investment return of 10% per month for a contract period of 12 to 48 months, but he did not own the Bitcoin, which GAS was said to be buying with his own money. she was. And they were convinced that it was risk-free: they would get their initial investment back in full at the end of the contract.

With bitcoin fever on the rise, dos Santos quickly became a celebrity in Cabo Frio.

“If he wanted to run for mayor and governor, he would win,” said Gilson Silva do Carmo, 52, one of dos Santos’ victims.

Police and prosecutors said the chubby young man with thick edges also led a noble life. Dos Santos bought expensive jewelry and fashionable apartments due to the influx of contracts from elsewhere in Latin America, and even from the United States, Europe and the Gulf.

According to experts, the generous Brazilian legislation regulating cryptocurrency has helped fuel Dos Santos’ rise.

At the same time, Brazilian securities regulators have made cryptocurrencies more attractive. National investment funds were allowed to invest in cryptocurrencies in 2018, which increased their credibility. Last year, Brazil approved a Bitcoin trading fund. This is the second accredited country in the world. Rio de Janeiro recently said it would like to provide incentives for those who use bitcoin to pay property taxes in the city.

Meanwhile, the trading of the Brazilian real on Binance, the world’s largest cryptocurrency exchange, rose to nearly $8.5 billion in the last quarter of 2021, according to market data provider Kaiko.

Many began fearing to miss out in and around Cabo Frio, as residents saw their neighbors get paid to invest their savings in GAS.

Do Carmo was in it. After contracting COVID-19 and struggling to get back to work, he had to use his retirement savings to earn an income.

Then his therapist told him that he sold his house to invest in gas gas and received a monthly return of 10% for a year. Do Carmo invested 40,000 riyals ($7,000). That’s just over half the amount left in his retirement fund.

At Cabo Frio, the success of Dos Santos has led other up-and-coming entrepreneurs to follow in his footsteps. Not to mention the businessman Charles Ponzi who died nearby in the charitable wing of the Rio de Janeiro Hospital in 1949. In American history in the 1920s, he was interred in a public cemetery in Rio for another $75.

Some competitors promised higher yields from gas gases – more than 20% per month.

Cabo Frio Mayor Jose Bonifacio admitted that his city was inspiring. “The talk about the city was to see how much[bitcoin]was and who was making the most money,” he said.

Dos Santos was not happy.

In mid-April, he discussed with his peers how his opponents stormed his territory, according to a WhatsApp message intercepted by the Federal Police.

“Here in Cabo Frio, there is a dealer, Mr. Pisano, for my clients. I cannot make it happen,” writes dos Santos.

Less than four months later, on August 4, Wesley Pisano, who was promoting as a cryptocurrency trader on social media, was shot dead at Porsche. Police accused dos Santos of ordering the strike.

Rio State Police have also linked two attempted murders with dos Santos and what they called “the extinction team”. On March 20, a dealer known as Nelcinio was shot dead while driving a BMW in Cabo Frio. He was seriously injured but survived. Three months later, a worker from another company was targeted and his car was hit by 40 bullets. also survived.

Matters came to mind on April 28, when the Rio Federal Police acted on anonymous advice and seized R$7 million at the helipad of the Insolito boutique hotel in Bugios, a short drive from Cabo Julio. Subsequently, a month-long survey of the work of dos Santos was conducted.

On August 25, the federal police warned that dos Santos was planning to flee Brazil, and that the federal police were linked to the GAS, including the dos Santos home, where dos Santos was found with 13.8 million Brazilian reals ($2.5 million) and taken into custody. Attacked more than 12 sites. Dealers also found a hard drive containing 10 times that amount in several sports cars, including bitcoin, gold bullion, jewelry, and a BMW Z4 convertible with a white and electric blue Porsche Panamera.

Authorities also indicted 16 of their other colleagues, including Dos Santos’s 38-year-old wife, Diaz Zelba, who left the country a few weeks before the raid and is believed to be in Florida. They say it has withdrawn more than 4,300 bitcoins, worth $185 million (real 1 billion). AP tried to find it but failed.

Was Carmo terrified of watching the seizures and arrests unfold? He invested the rest of his savings in the company just a few weeks ago.

He said, “I thought, Oh my God, what have I done?” “You see everything I fought and your life drifting from moment to moment.”

However, many early GAS investors who received monthly payments on a regular basis refused to believe that Dos Santos had done anything illegal.

After his arrest, the crowd gathered outside the TV Globo station in Rio de Janeiro to protest the alleged coverage of the racket. In October, many supporters blocked the streets in Rio Federal Court and demanded his release.

Jefferson Brandan, a tax attorney, GAS investor and supporter of Dos Santos, said the company offered an attractive alternative for the “responsible only” banking sector.

Brandau said GAS offered investors the opportunity to “share the profits.” “Instead of giving you cookie crumbs, I’ll give you slices.”

From prison, dos Santos maintained his innocence. In an open letter to investors last month, he accused the authorities of freezing gas assets and “preventing me from paying you.”

Brazilian law enforcement agencies are still trying to reveal the true size of dos Santos’ empire.

Prosecutors have identified at least 27,000 GAS victims and are active in at least 13 Brazilian states and seven other countries, including the United States, the United Arab Emirates, the United Kingdom and Portugal.

Luciano Regis, a lawyer representing dozens of victims, said the real toll may be much higher. He said that one of his clients employed her husband, mother, brother, sister-in-law and 82-year-old aunt, and invested a total of 822,000 riyals (about $150,000).

“It’s hard to talk to people in Cabo Frio who don’t know who the investor is,” he said.

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