CABO FRIO, Brazil (AP) — In April, Brazil’s federal police stormed the helipad of a boutique 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 advised police they labored for G.A.S. Consulting & Expertise, a cryptocurrency funding agency based by a former waiter-turned-multimillionaire who’s the central determine in what’s alleged to be one in all Brazil’s biggest-ever pyramid schemes.
Police say the corporate owned by 38-year-old Glaidson Acácio dos Santos had complete transactions value no less than $7 billion ($38 billion reais) from 2015 by means of mid-2021 as a part of a Bitcoin-based Ponzi scheme that promised buyers 10% month-to-month returns.
In tons of of pages of paperwork obtained by The Related Press, federal and state police and prosecutors accuse dos Santos and his associates of working a complicated racket defrauding hundreds of small-scale buyers who believed they have been getting wealthy off Bitcoin’s steep appreciation. He’s now in a Rio jail awaiting trial on fees together with racketeering, monetary crimes and ordering the homicide and tried homicide of two enterprise opponents. He stays beneath investigation within the tried homicide of a 3rd competitor.
In public statements, dos Santos has repeatedly asserted his innocence. His legal professionals didn’t reply to AP requests for remark.
Regardless of the lengthy record of fees he faces, dos Santos represents an unlikely hero to his fervent supporters. Many view him as a modest Black man whose unorthodox Bitcoin enterprise made them rich by gaming a monetary system they imagine 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 sexy protect in opposition to depreciation of the Brazilian actual and double-digit inflation.
Bitcoin fervor was significantly eager in Cabo Frio, the resort city of 230,000 the place G.A.S. was primarily based. As G.A.S. revenues rose, enriching early adopters, copycat companies sprang up, in search of to money in on the craze. A wave of cryptocurrency-related violence quickly adopted.
With so many alleged pyramid schemes, Cabo Frio got here to be often called the “New Egypt.” And because the city’s high canine, dos Santos was dubbed the “Bitcoin Pharaoh.”
Police say dos Santos started buying and selling in Bitcoin after leaving his job as a waiter in 2014. A one-time evangelical preacher in coaching, he enlisted shoppers from the Common Church of the Kingdom of God, Brazil’s largest neo-Pentecostal group, who earned a referral price for bringing in recent recruits and kicking again cash to G.A.S., police paperwork say.
Jéfferson Colombo, a cryptofinance researcher at Sao Paulo’s Getulio Vargas Basis, mentioned non secular teams are sometimes focused by pyramid schemers. “It’s by means of contacts that you simply improve the bottom of the pyramid,” he mentioned.
In a press release, the Common Church mentioned it was cooperating with authorities and accused dos Santos of “harassing and recruiting” pastors and their flocks to affix his firm.
By 2017, dos Santos was beginning to make severe cash — and appeal to authorities’ consideration. That yr his firm’s transactions totaled practically 10 million reais ($1.8 million), 15 occasions larger than the earlier yr as cash siphoned out and in of his financial institution accounts from throughout Brazil, in response to a federal police report. The nation’s monetary intelligence unit additionally observed the corporate — on the time registered as a restaurant — was frequently buying and selling cryptocurrency on on-line change platforms.
The alleged scheme labored like this, in response to prosecutors: Dos Santos would instruct shoppers to deposit their cash – in money to keep away from additional scrutiny – into financial institution accounts run by managing companions. The cash would then be transferred to dos Santos or his Venezuelan spouse, Mirelis Yoseline Diaz Zerpa, who would both pocket it, use it to purchase bitcoins and different cryptocurrencies in addition to conventional monetary belongings, or repay different members of the scheme.
Shoppers have been promised a ten% month-to-month return on their investments over 12- to 48-month contract durations, however didn’t personal the bitcoins they have been advised G.A.S. was buying with their cash. And, they have been assured, it was risk-free: They’d get their complete preliminary funding again on the finish of the contract.
As Bitcoin fever grew, dos Santos was quick changing into a celeb in Cabo Frio.
“If he wished to run for mayor, governor even, he’d win,” mentioned Gilson Silva do Carmo, 52, one in all dos Santos’ alleged victims.
The chubby younger man in thick-rimmed glasses was additionally gaining a style for the excessive life, police and prosecutors mentioned. Dos Santos purchased costly jewellery and a swanky condo as contracts poured in from elsewhere in Latin America and as distant because the U.S., Europe and the Gulf.
Brazil’s lenient legal guidelines regulating cryptocurrency helped gas dos Santos’ rise, consultants say.
On the identical time, Brazil’s securities regulator was making digital currencies extra enticing: It approved the nation’s funding funds to put money into cryptocurrencies in 2018, giving them better credibility. Final yr, Brazil authorized Bitcoin exchange-traded funds, solely the second nation on this planet to take action. And Rio de Janeiro has just lately mentioned it needs to supply incentives to these paying metropolis property taxes utilizing bitcoins.
In the meantime, trades in Brazilian reais on the world’s largest cryptocurrency change, Binance, jumped to just about $8.5 billion within the fourth quarter of 2021, from simply $152 million over the identical interval a yr earlier, in response to market information supplier Kaiko.
In and round Cabo Frio, the place residents had seen their 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 catching COVID-19 and struggling to get again to work, he was compelled to faucet his retirement financial savings to make ends meet.
Then his therapist advised him he offered his home to put money into G.A.S., and had been receiving 10% month-to-month returns for a yr. Do Carmo invested 40,000 reais ($7,000) — simply over half the cash left in his retirement fund.
In Cabo Frio, dos Santos’ success impressed different budding entrepreneurs to observe in his footsteps — to not point out these of Charles Ponzi, who died close by in a Rio de Janeiro hospital charity ward in 1949. The Italian immigrant who engineered one of many largest scams in U.S. historical past within the Nineteen Twenties was buried in a public Rio cemetery together with his final $75.
Some opponents promised even larger returns than G.A.S. — 20% or extra a month.
Cabo Frio Mayor José Bonifácio acknowledged his metropolis discovered itself beneath a spell. “The discuss of the city was to know the way a lot (Bitcoin) was at, who was giving an even bigger return,” he mentioned.
Dos Santos wasn’t completely happy.
In mid-April, he mentioned with associates how rivals have been encroaching on his turf, in response to WhatsApp messages intercepted by federal police.
“There’s a dealer right here in Cabo Frio, Mr. Pessano, who’s going for my shoppers. I can’t let that occur,” dos Santos wrote.
Lower than 4 months later, on Aug. 4, Wesley Pessano, who marketed himself on social media as a cryptocurrency dealer, was shot lifeless in his Porsche. Police accuse dos Santos of ordering the hit.
Rio state police have additionally linked two tried killings to dos Santos and what they known as his “extermination workforce.” On March 20, a dealer often called Nilsinho was shot whereas driving his BMW by means of Cabo Frio. He was severely injured however survived. Three months later one other agency’s operator was focused, his automotive hit by 40 bullets; he additionally survived.
Issues got here to a head on April 28 when Rio federal police, appearing on an nameless tip, seized the 7 million reais on the helipad of the Insolito Boutique Lodge in Buzios, a brief drive from Cabo Frio. A monthslong investigation into dos Santos’ enterprise adopted.
On Aug. 25, alerted that dos Santos was planning to flee Brazil, federal police raided greater than a dozen places linked to G.A.S., together with dos Santos’ residence the place he was discovered with 13.8 million reais ($2.5 million) and brought into custody. Brokers additionally discovered onerous drives containing 10 occasions that quantity in Bitcoin, gold bars, jewellery and several other sports activities vehicles, together with a white Porsche Panamera and an electrical blue BMW Z4 convertible.
Sixteen different associates have been additionally charged, together with Diaz Zerpa, dos Santos’ 38-year-old spouse, who left the nation weeks earlier than the raid and is believed to be in Florida, in response to authorities. They are saying she withdrew greater than 4,300 bitcoins value $185 million (1 billion reais). AP makes an attempt to find her have been unsuccessful.
Do Carmo watched in horror because the seizures and arrests unfolded; he had invested the remainder of his financial savings within the firm simply weeks earlier.
“I assumed, ‘My God, what have I executed?’” he mentioned. “You watch the whole lot you fought for, your complete life wash away from one second to the subsequent.”
Nonetheless, many early G.A.S. buyers who had been receiving common month-to-month funds refused to imagine dos Santos did something unlawful.
After his arrest, a crowd gathered exterior broadcaster TV Globo in Rio de Janeiro to protest protection of the alleged racket. In October, scores of supporters blocked the road exterior a federal courthouse in Rio, demanding his freedom.
Jeferson Brandão, a tax lawyer, G.A.S. investor and vocal advocate of dos Santos, mentioned the corporate supplied a sexy different to a banking sector that “solely fees you charges.”
G.A.S. supplied buyers an opportunity to “participate within the revenue,” Brandão mentioned. ”‘As a substitute of supplying you with a crumb of the cake, I’m going to provide you a slice.’”
From jail, dos Santos has maintained his innocence. In an open letter to buyers final month, he blamed the authorities for freezing G.A.S. belongings and “prohibiting me from paying you.”
Brazilian regulation enforcement continues to be making an attempt to uncover the true dimension of dos Santos’ empire.
Prosecutors have recognized no less than 27,000 G.A.S. victims, with operations in no less than 13 Brazilian states and 7 different nations, together with the U.S., United Arab Emirates, the U.Okay. and Portugal.
The true tally is probably going a lot larger, mentioned Luciano Regis, a lawyer representing dozens of victims. He mentioned one in all his shoppers enlisted her husband, mom, brother, sister-in-law and an 82-year-old aunt, investing a complete 822,000 reais (about $150,000).
“It’s onerous to have a dialog with anybody in Cabo Frio who doesn’t know somebody who invested,” he mentioned.