Crypto enthusiasts and users understand the risks inherent in digital asset investments. Besides losing funds in price crashes, investors can lose money through scams, pump-and-dump schemes, exchange and protocol hacks, Ponzi schemes, etc.
Recently, many Latino investors have been hit with a crypto Ponzi scheme that led to the loss of funds. A City Hall warning disclosed that up to 30 residents had fallen victim to this fraud operation, cautioning others to be careful.
Crypto Ponzi Scheme Claims Investor’s Funds
The Latin Times report shared that up to 30 victims of the operation have alerted authorities of their losses to the scammers. In detail, the people behind the scam are employees of CryptoFX LLC, a company currently involved in a federal case in Texas.
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The defendants, Mauricio Chavez and Giorgio Benvenuto, were running an unregistered crypto-asset offering to Latino investors in September 2022. When regulators got wind of the illegal dealings, the SEC executed an emergency action to stop the offering.
In the press report, SEC officials disclosed that Chavez claimed to be well-versed in crypto trading and supposedly taught Latino residents how to make more money. He used Bitcoin and NFTs to depict the crypto assets the victims can trade and get richer.
However, when the residents come to his seminar, he’ll solicit them to invest in CryptoFX so the firm will conduct digital asset and foreign exchange trading on their behalf.
But the SEC revealed he had no training, experience, or education about crypto assets or investments. He sold himself as an advanced-level trader, giving the investors fake paperwork to complete, promising they won’t lose their funds. Also, Chavez was never engaging in crypto trading but instead paying out investors with other people’s money based on the Ponzi scheme model.
He used 90% of investors’ funds to pay out other investors, develop real estate under him and Benvenuto, and fund his wealthy lifestyle.
On the other hand, Benvenuto pulled in many investors to the scheme, used some of their money personally, and sent some under GBT Group, a company belonging to him and Chavez.
According to the SEC, the duo made $2.7 million in investor payments and used $8 million for personal purposes. It also disclosed that Chavez alone spent almost $1.5 million on cars, jewelry, a house, credit card payments, adult entertainment, etc.
City Hall Warns Against the Scam Providing Solution To Victims
City Hall warned about the digital asset Ponzi scheme last week after many residents contacted the authorities. In the warning, the city disclosed that many CryptoFX representatives are still soliciting funds from residents via WhatsApp chat.
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Therefore, the city warned residents not to invest in crypto-related offers but to exercise caution and research intensely about investments. Also, it advised the residents to contact the officials if CryptoFX reps ask them to send funds.
The warning also featured a site where victims can file claims on their lost funds. Another site to file for claims include the California Department of Financial Protection and Innovation platform.
Featured image from Pexels and chart from Tradingview.com