Bitcoin Ponzi Scams Drain Wealth of Brazilians
Brazil’s federal police raided the helipad of a beachside hotel in the state of Rio de Janeiro in April, arresting two men and a woman for loading a helicopter with 7 million reais ($1.3 million) in neatly wrapped notes. The prisoners informed police they worked for G.A.S. Consulting & Technology, a cryptocurrency investment business created by a former waiter who became a multimillionaire and is said to be the leading player in one of the largest pyramid schemes in Brazilian history.
According to police, the firm run by 38-year-old Glaidson Acácio dos Santos processed at least $7 billion ($38 billion reais) in transactions between 2015 and mid-2021 as part of a Bitcoin-based Ponzi scam that promised investors 10% monthly returns. Federal and state police and prosecutors accuse dos Santos of conducting a sophisticated scheme deceiving thousands of small-scale investors who felt they were becoming wealthy off Bitcoin’s sharp rise, according to hundreds of pages of papers seen by The Associated Press.
He is now being held in a Rio de Janeiro prison for trial on allegations of racketeering, financial crimes, and ordering the murder and attempted murder of two business opponents. He is still being investigated in connection with the attempted murder of a third contender. Dos Santos has maintained his innocence on several occasions. His attorneys did not respond to demands for comment from the AP. Despite the allegations, dos Santos’ fans see him as an unexpected hero. Many saw him as a humble Black guy whose unconventional Bitcoin company enriched them by exploiting a financial system they feel is rigged against them by affluent white elites.
Additionally, the case demonstrates Brazil’s rapidly expanding thirst for cryptocurrencies, where years of economic and political turmoil have made digital currencies an appealing hedge against the Brazilian real’s loss and double-digit inflation. Bitcoin enthusiasm was palpable in Cabo Frio, the vacation town where G.A.S. was headquartered. As G.A.S. profits increased, rewarding early adopters, copycat businesses popped up to cash in. Following that, a wave of cryptocurrency-related violence occurred.
Cabo Frio became nicknamed as the “New Egypt” because to the abundance of claimed pyramid scams. And dos Santos was called the “Bitcoin Pharaoh” as the town’s top dog. According to police, dos Santos started trading Bitcoin in 2014, shortly after quitting his job as a server. He recruited customers from the Universal Church of the Kingdom of God, where he had previously trained as a preacher, officials said, offering referral rewards to anyone who brought in new members.
The Universal Church charged dos Santos of “harassing and recruiting” pastors and their congregations to join his organization in a statement. By 2017, dos Santos was amassing substantial wealth — and drawing the attention of authorities. His company’s transactions totalled 10 million reais ($1.8 million) that year, a 15-fold increase over the previous year. Additionally, the country’s financial intelligence agency saw the organization — registered as a restaurant — exchanging cryptocurrencies on internet exchange platforms on a daily basis.
According to prosecutors, the alleged plan operated as follows: clients placed funds into bank accounts managed by managing partners. The funds were subsequently transferred to dos Santos or his Venezuelan wife, Mirelis Yoseline Diaz Zerpa, who pocketed them, used them to purchase bitcoins and other cryptocurrencies as well as conventional financial assets, or used them to pay off other scheme participants.
Clients were promised a 10% monthly return on their investments over 12- to 48-month contracts, but did not get ownership of the bitcoins G.A.S claimed to have purchased with their money. And, they were promised, it was risk-free: they would get a full refund at the conclusion of the contract. As Bitcoin fever spread, dos Santos rose in popularity in Cabo Frio. “If he ran for mayor, or even governor, he would win,” claimed Gilson Silva do Carmo, 52, one of dos Santos’ alleged victims.
The obese young guy with thick-rimmed spectacles was also developing an appetite for the high life, purchasing pricey jewelry and a posh apartment as contracts flowed in from Latin America, the United States, Europe, and the Gulf. Brazil’s lax cryptocurrency regulations, according to analysts, aided dos Santos’ ascent. Simultaneously, Brazil’s securities regulation increased the appeal of cryptocurrency: It granted additional legitimacy to digital currencies by allowing the country’s investment funds to invest in them in 2018. Brazil became the second jurisdiction in the world to legalize Bitcoin exchange-traded funds last year.
Residents in and around Cabo Frio started to worry losing out after seeing neighbors earn profits by putting their life savings in G.A.S. Among them was Do Carmo. Do Carmo invested slightly over half of his retirement savings after his therapist informed him he sold his property to invest in G.A.S. and had been earning 10% monthly returns for a year. Dos Santos’ achievement influenced others in Cabo Frio: Some rivals claimed even larger monthly returns – 20% or more.
Dos Santos was displeased. According to federal investigators intercepted WhatsApp chats from mid-April, he talked with pals how competitors were encroaching on his area. Wesley Pessano, a bitcoin trader, was shot and killed in his Porsche four months later. Dos Santos is charged with ordering the attack. Additionally, Rio state police have connected dos Santos to two attempted murders. On March 20, a merchant was shot and killed while travelling through Cabo Frio in his BMW. Three months later, the operator of another enterprise was attacked, his vehicle being struck by 40 gunshots.
Both were rescued. The situation came to a climax on April 28 when Rio police confiscated the 7 million reais at the Insolito Boutique Hotel’s helipad near Cabo Frio. Following that, a months-long inquiry into dos Santos’ firm was launched. On Aug. 25, federal authorities searched over a dozen places associated with G.A.S., including dos Santos’ residence, where he was captured with 13.8 million reais ($2.5 million). Additionally, agents discovered hard disks storing ten times that much in Bitcoin, gold bars, jewelry, and many high-performance automobiles.
Sixteen accomplices were also indicted, including Diaz Zerpa, dos Santos’ wife, who investigators think fled the country weeks before the raid and is now in Florida. According to them, she withdrawn over 4,300 bitcoins valued $185 million (1 billion reals). Do Carmo stood there in terror; he had only weeks ago placed the last of his funds in the firm. “I asked myself, ‘My God, what have I done?” he said. “You watch as all you’ve battled for, your whole life, is washed away moment by moment.”
Brazilian law enforcement continues to investigate the scope of dos Santos’ enterprise. At least 27,000 victims have been discovered by prosecutors in at least 13 Brazilian states and seven other countries, including the United States, the United Arab Emirates, the United Kingdom, and Portugal. However, Luciano Regis, a lawyer representing hundreds of victims, believes the genuine figure is significantly higher. “It’s difficult to find someone in Cabo Frio who doesn’t know someone who invested,” he said.