CABO FRIO, Brazil (AP) — In April, Brazil’s federal police stormed the helipad of a seaside lodge in Rio de Janeiro state, the place they busted two males and a lady loading a chopper with 7 million reais ($1.3 million) in neatly packed payments.
The detainees informed police they labored for G.A.S. Consulting & Technology, a cryptocurrency funding agency based by a former waiter-turned-multimillionaire who’s the central determine in what’s alleged to be one in every of Brazil’s biggest-ever pyramid schemes.
Police say the corporate owned by 38-year-old Glaidson Acácio dos Santos had whole transactions price not less than $7 billion ($38 billion reais) from 2015 via mid-2021 as a part of a Bitcoin-based Ponzi scheme that promised traders 10% month-to-month returns.
In lots of of pages of paperwork obtained by The Associated Press, federal and state police and prosecutors accuse dos Santos of working a classy racket defrauding hundreds of small-scale traders who believed they have been getting wealthy off Bitcoin’s steep appreciation. He is now in a Rio jail awaiting trial on expenses together with racketeering, monetary crimes and ordering the homicide and tried homicide of two enterprise rivals. He stays beneath investigation within the tried homicide of a 3rd competitor.
Dos Santos has repeatedly asserted his innocence. His legal professionals didn’t reply to AP requests for remark.
Despite the fees, dos Santos represents an unlikely hero to supporters. Many view him as a modest Black man whose unorthodox Bitcoin enterprise made them rich by gaming a monetary system they consider is rigged by rich white elites.
The case additionally underscores the fast-growing urge for food for cryptocurrencies in Brazil, the place years of financial and political crises have made digital currencies a beautiful defend towards depreciation of the Brazilian actual and double-digit inflation.
Bitcoin fervor was excessive in Cabo Frio, the resort city the place G.A.S. was primarily based. As G.A.S. revenues rose, enriching early adopters, copycat corporations sprang up, searching for to money in. A wave of cryptocurrency-related violence adopted.
With so many alleged pyramid schemes, Cabo Frio got here to be referred to as the “New Egypt.” And because the city’s prime canine, dos Santos was dubbed the “Bitcoin Pharaoh.”
Police say dos Santos started buying and selling in Bitcoin in 2014 after leaving his job as a waiter. He enlisted purchasers from the Universal Church of the Kingdom of God, the place he had as soon as skilled as a preacher, promising referral charges to those that introduced in contemporary recruits, authorities say.
In an announcement, the Universal Church accused dos Santos of “harassing and recruiting” pastors and their flocks to affix his firm.
By 2017, dos Santos was making severe cash — and attracting authorities’ consideration. That 12 months his firm’s transactions totaled 10 million reais ($1.8 million), 15 occasions greater than the earlier 12 months. The nation’s monetary intelligence unit additionally observed the corporate — registered as a restaurant — was recurrently buying and selling cryptocurrency on on-line trade platforms.
Prosecutors say the alleged scheme labored like this: Clients deposited their cash into financial institution accounts run by managing companions. The cash was then transferred to dos Santos or his Venezuelan spouse, Mirelis Yoseline Diaz Zerpa, who would both pocket it, purchase bitcoins and different cryptocurrencies in addition to conventional monetary belongings, or repay different members of the scheme.
Clients have been promised a ten% month-to-month return on their investments over 12- to 48-month contracts, however didn’t personal the bitcoins they have been informed G.A.S. purchased with their cash. And, they have been assured, it was risk-free: They would get their complete preliminary funding again on the finish of the contract.
As Bitcoin fever grew, dos Santos was quick changing into a star in Cabo Frio.
“If he wanted to run for mayor, governor even, he’d win,” stated Gilson Silva do Carmo, 52, one in every of dos Santos’ alleged victims.
The chubby younger man in thick-rimmed glasses was additionally gaining a style for the excessive life, shopping for costly jewellery and a swanky residence as contracts poured in from elsewhere in Latin America, the U.S., Europe and the Gulf.
Brazil’s lenient legal guidelines regulating cryptocurrency helped gas dos Santos’ rise, consultants say.
At the identical time, Brazil’s securities regulator was making cryptocurrency extra engaging: It licensed the nation’s funding funds to put money into digital currencies in 2018, giving them better credibility. Last 12 months, Brazil accepted Bitcoin exchange-traded funds, solely the second nation on the earth to take action.
In and round Cabo Frio, the place residents noticed neighbors reap rewards by investing their life financial savings in G.A.S., many started to concern lacking out.
Do Carmo was amongst them.
After his therapist informed him he offered his home to put money into G.A.S. and had been receiving 10% month-to-month returns for a 12 months, do Carmo invested simply over half his retirement fund.
In Cabo Frio, dos Santos’ success impressed others: Some rivals promised even increased returns — 20% or extra a month.
Dos Santos wasn’t pleased.
In mid-April, he mentioned with associates how rivals have been encroaching on his turf, based on WhatsApp messages intercepted by federal police.
Four months later Wesley Pessano, a cryptocurrency dealer, was shot lifeless in his Porsche. Police accuse dos Santos of ordering the hit.
Rio state police additionally linked two tried killings to dos Santos. On March 20, a dealer was shot whereas driving his BMW via Cabo Frio. Three months later one other agency’s operator was focused, his automobile hit by 40 bullets. Both survived.
Things got here to a head on April 28 when Rio police seized the 7 million reais on the helipad of the Insolito Boutique Hotel exterior Cabo Frio. A monthslong investigation into dos Santos’ enterprise adopted.
On Aug. 25, federal police raided greater than a dozen areas linked to G.A.S., together with dos Santos’ dwelling the place he was discovered with 13.8 million reais ($2.5 million) and arrested. Agents additionally discovered arduous drives containing 10 occasions that quantity in Bitcoin, gold bars, jewellery and a number of other sports activities automobiles.
Sixteen associates have been additionally charged, together with Diaz Zerpa, dos Santos’ spouse, who left the nation weeks earlier than the raid and is believed to be in Florida, based on authorities. They say she withdrew greater than 4,300 bitcoins price $185 million (1 billion reais).
Do Carmo watched in horror; he had invested the remainder of his financial savings within the firm simply weeks earlier.
“I thought, ‘My God, what have I done?’” he stated. “You watch everything you fought for, your entire life wash away from one moment to the next.”
Brazilian legislation enforcement continues to be making an attempt to uncover the true dimension of dos Santos’ empire.
Prosecutors have recognized not less than 27,000 victims in not less than 13 Brazilian states and 7 different nations, together with the U.S., United Arab Emirates, the U.Okay. and Portugal.
However, the true tally is probably going a lot increased, stated Luciano Regis, a lawyer representing dozens of victims.
“It’s hard to have a conversation with anyone in Cabo Frio who doesn’t know someone who invested,” he stated.